>> the economy, the empty cubicles you are seeing across the country, it has not stopped. >> we have been waiting for supply to pick up, and supply is exploding. >> we have taken wealth from the public sector and given it to the private sector. >> we are going to see a lot of price increases in the short run. the key question is are those transitory or are those sustained. > now it is time to pull back the fiscal and monetary stimulus. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone. jonathan ferro, lisa abramowicz,

and tom keene. jobs day in this hour. we will look at the american labor economy, what it means for bonds. jeff rosenberg with us. jim glassman of jp morgan area and what it means for the stock market. the stock markets will react. jonathan: equities, record highs on the s&p 500. record highs and europe as well. that is the big story. it is mission get back to work. to what extent are the delta variant fears derailing that process? william: what i see -- tom: what i see is subadra rajappa mentioned the doom and gloom is overdone. jonathan: 1.25% overdone in the bond market? guy: that is still a low number -- tom: that is still a low number. jonathan: how many times have you and i heard that over the years, that yields are too low, and then they keep going lower? tom: talking to bill dudley there, former president of the new york fed, he's thinking very much about getting the real

yield back. the dislocations in the market are not only part of this jobs report, but the one coming up for august. lisa: not only with the headline number, but with some of the details. it was interesting that ellen zentner really focused on the blot aspect of this employment report, and particular the wage friend. want to bring you this in the dow jones newswire, walmart is extending bonuses to keep its hourly workers. how much will this affect hourly wages going up in this report? tom: also, the united airlines headline. so much going on right now. what is so important about this hour on radio and television nationwide is it is about the markets. the bond market, yes, the american economy, and the stock market, how they react. jonathan: the s&p 500 coming into friday, at record highs. we advanced by 0.03 percent. we have walk you through the bond market, 1.2499% on tens.

euro-dollar negative, the euro weaker, dollars stronger. crude had a look at $70 earlier. here are the numbers you need to look for in about 27 minutes' time. 802,000 is the median estimate. the range is wide. 1.2 million at the high-end, 356,000 at the low end. tom: here's the number i care about, and it goes to "the real yield" this afternoon on television. 1.10 on the three year yield. that is an artificiality that all of us must deal with, which of course means jill carey hall or -- jill carey hall starts us strong this hour with america. what is your assessment -- with bank of america. what is your assessment for

year-end? jill: we are expecting the market will in the year lower rather than higher. we think a lot of the good news has been priced into market this year. i think it has been about earnings coming through which we have seen in earnings seasons. another big beat so far. but multiples are very elevated, and the seller -- the cylinder indicators are increasingly bullish. a lot of the good news has been great. these companies that beat this torrent outperforming that munch, which we saw last quarter. outside of the last quarter, last time you saw that happen was october of 2000. jonathan: walk me through the sector preference within that call. jonathan: we still like some of the cyclical areas. we are overweight energy, financials. i think where interest rates are

right now, we would expect them to move higher rather than lower. we still expect value overgrowth. especially with the jobs report this morning, wages are going to be a very important metric to continue to watch. so we are underweight some more labor intensive like consumer discretionary, where so far for the s&p 500 margins some generally, but you are seeing a big surge in wages and pressures. so i think a lot of areas of the market had a high ratio of employees relative to their sales are going to need some of the areas that could be more challenged if wage inflation continues to accelerate. jonathan: you and your team have done from it is work on that, so thanks for providing it. the call for value overgrowth, i want to understand from your perspective why there is a bond market call that underpins that view. what is the bond market call, if

there is one, that underpins that you? katie: really, we have found that the profit cycle has been a bigger driver of value versus growth in interest rates, so really, you want to own value when growth is becoming more abundant within the market. office on a trailing basis is still accelerating -- if growth has become more abundant and better within the value segment of the market. these value stocks are still generally cheap and under owned relative to growth stocks. so i think there is a number of drivers that could even be more important than industry to devoting value overgrowth right now. lisa: you haven't mentioned the delta variant, even though that seems to be mentioned in every other article about the

market trends right now. that has seemed to put a crimp in some of the cyclicals and small-cap names you track. when do you start to care about the delta variant? is it impacting your appreciation for some of the stocks, or do you think this is a buying opportunity? katie: it is a risk we are all going to continue to monitor, but i think it is from a reopening and recovery perspective. there's certainly been talk in the market where we have seen this has grown to become more of a concern, but the arrow areas of an overall service's recovery, those of the things we are going to be watching very closely on but overall, as we prepare throughout this recovery , haven't really reflected much of that recovery at all. they have still been trading at

this double-digit historical discount to large-cap peers. these have been accelerating just like inflation. i think there is more room to run on small fishes large -- on small versus large. but i think it is going to be something that we continue monitoring going forward and is one of the biggest risks certainly from the market. lisa: wall street shops are starting to project out to the end of 2022. have you done that? does this down market continue through then as so many have drop-down earnings ahead of the cycle? katie: we don't have a -- jill: we don't have a 2022 target

yet. valuation does it tend to be a great predictor over the next year or so. if you are a longer-term investor thinking about equities over the next decade, that is where returns from a long-term valuation framework are consistently much lower than what we have seen by our frameworks in prior years, just given the fact that multiples are so elevated right now. if you are a long-term equity investor, you are going to see much more tepid annualized returns for equities then we might have seen a number of years ago. would you have a did -- would you add a dividend yield to all of that, we still favor equities over bonds at this point, but certainly that allocation decision has grown less skewed towards equities then it was a number of years ago. jonathan: jill, thank you. we've got to run and get ready for that bank rose report. jill carey hall, looking for 3800 on the s&p.

this equity market now, all-time highs into friday. mohamed el-erian just publishing in the washington post. "the fed's ultra-loose monetary policy could hurt both the economy and bidens agenda. we will catch up and about 50 minutes time. tom: these are the back-and-forth crosscurrents. you say to yourself, how do you go from bank of america and goldman sachs? you could drive a mack truck through that. jonathan: it is a 900 points fred. tom: people are going to go, wait a minute, explained that. jonathan: i can't explain it for you. [laughter] tom: lisa can. lisa: a lot of the goldman sachs call was underpinned by this belief that rates remain low. if you believe rates are going to remain that much lower, that's got to upset the apple

cart when it comes to equity valuations, especially overtime. tom: i would say it is a nominal gdp differential call, where goldman sachs is looking for some animal spirit in 2022 and on, and bank of america has a much more cautious view. jonathan: it is where they think the earnings will show up. lisa: but also, there's a question of we don't know treasury yields. they have continued to go down despite all of the calls for them to go up. jonathan: if i could tell you the print, and i do not have the print, the white house has the print. if i could tell you the number coming out in 19 minutes, could you tell me how this bond market would respond? lisa: absolutely not. jonathan: that's where the tension lies. yields higher by three basis points. did you say something, tom?

tom: dow futures are up. [laughter] jonathan: from new york this morning, it's a beautiful morning. this is bloomberg. ♪ ritika: the u.s. senate is set tomorrow to approve that $550 billion infrastructure package. it will be the largest infusion of cash aided cades before -- infusion of cash. united says employees must be vaccinated against coronavirus. united says employees must upload their injection records to a company database no later than october 25. public universities in the u.s. faced lawsuits over coronavirus vaccine mandates, according to dow jones. all suits challenging the requirements have been filed in indiana, connecticut,

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♪ >> you are living in a world of excess supply. therefore, you need to create

the liquidity that allows inflation rate to actually not get sucked into a deflationary bias. this has been the fed's ongoing risk. jonathan: it would take about a second after that payroll report drops to debate what the fed will or won't do next. alongside tom keene and lisa abramowicz, i'm jonathan ferro. we are 12 minutes away from a payrolls report in america. your equity market looks like this, up two, positive 0.05%. yields are higher by two or three basis points to 1.2499%. we are looking for something like 870,000 now. here's the median estimate going into the jobs report. tom: it is going to be an eventful number of hours. the secretary with jon ferro at 9:00 into the 10:00 hour. before that, dr. el-erian with that important "washington

post" essay. jonathan: we will ask the question that led to that essay. will this data, inflation specifically, overwhelm the goals of the federal reserve and this administration? tom: let's tired and now -- let's tired and now am of the essay where he talks about a busted -- let's tie it in now, with the essay where he talks about a busted fed, with jim glassman. do we have a busted wage mechanism? james: when you have eight and half million jobs shy of where we should be, a lot of those are lower paid or those who work in hospitality or leisure, i think it is really difficult to make sense of it. what i hear from people is i think the legacy of this crisis is going to be giving more

benefits for workers. pay is going up. overtime will go up. it is getting hard to find people. you are having to pay more for them. it is also forcing you to automate more. to me, the legacy of this crisis will be the step forward in labor productivity and pay. tom: if we have an increased labor share, does that come from leadership from big companies? what is the mechanism to get the wage up? james: it is smaller businesses are going to be struggling the most because they are going to have to work harder to find people. i hear that story a lot and calls with clients. i think it comes from everywhere. everybody is feeling this. everybody is experiencing the shortage of workers. this did not happen overnight. this has been brewing for a good decade. it is related to the demographic shift going on in this country. i think this is going to be a more favorable story in the years ahead for workers than it has been for two decades because all of that innovation that

moved us from brick-and-mortar to online really has pushed the share of income going to workers down and the share of profits up. that is really the dynamic that has been driving a lot of this national debate about the income divide and the widening distribution of income. i think what is going on now is beginning to shift that and stabilize it. lisa: there is so much to unpack. you were talking about going into an era of increased productivity with automation. i wonder how this factors into the participation rate that has been in a downward trend for the past three or four decades. do you expect the participation rate to continue to go lower if people are remaining out of the workforce permanently, as some of the more roach jobs -- more rote jobs get automated? james: right now, the decline in the labor force has really been exacerbated by this crisis, particularly women more than men. i think this trend you are

talking about for the last couple of decades, this is a structural thing that has been going on, and it has got to do with the aging of the workforce. for example, people who are working age, 16 to 70 years of age, used to grow 200,000 a month. now it is 50,000 a month, which aims there's a huge demographic of people retiring. maybe 30% now is over the age of 65. a decade ago it was 20%. that is a huge change. we normally ignore this as economists because immigration tends to fill the gap. if we don't have the people for the jobs, we tend to get immigration, and we are not seeing that in the last decade. lisa: i would love you to weigh in on the point that mohamed el-erian was making in his column, saying that at this point, the fed maintaining such an easy policy, the fact that they are maintaining their bond purchasing program despite some of the hot numbers come out is

counterproductive, and could hamper the agenda of the biden administration and the economy. do you agree? james: no, i agree with the fed. i think they are doing the right thing. we have 8.5 million jobs left to go to get things back to normal. if we can't get people back to work, it is going to create even bigger problems down the road. i understand it makes everybody nervous when you see the fed buying assets and keeping rates low when the economy is making progress. it is making progress, but we still have a long way to go. how much employment do you need to get to get everybody back to work? jonathan: we've got to run. good to catch up. you know how this works. at 8:30 eastern, the number drops and we go to one man. that man is with us now, bloomberg's michael mckee. let's get to the numbers you are looking for in about six minutes. michael: the consensus is for

858,000, but the dispersion is really wide. stephen stanley at amherst pierpont makes a good point, that our models are basically designed to look at the demand for labor, but this is a supply of labor problem that is really hard to figure out, how many people are going to be out there with the jobs that are going to be open. it is interesting to see how the markets react to that. tom: the heart of what he just said is this is a permanently changed labor economy. do you believe that, and does the fed believe that? michael: i think both of us do. it has been changing for quite a while because of the participation rate as the baby boomers retire out, but this accelerated that movement. baby boomers are going to be the people who are the higher skilled, the higher paid, and except for you, everybody is quitting. tom: thank you. jonathan: i wasn't going there, tom. i promise you. tom: this is the third time we've heard this in the last 90 minutes. zentner, glassman, mckee.

jonathan: we are five minutes away. 870,000, that is the estimate. lisa: the question is, how much does this matter in the scheme of things? what is the threshold for the fed caring? is it enough to get one pay hold let -- one payrolls like this, without the effect of the delta variant? jonathan: it is the most import jobs report until the next one, september 3. september 3, we will have this conversation all over again. what does it mean for september 22? tom: we are in a natural disaster. do you have the mckee chart? that is the dislocation of this economy. jonathan: will supply arrive? let's run through the price action as we beat the drum a little but hard to going into payrolls. your equity market up two on the s&p 500. into the bond market, yields

higher by two or three basis points to 1.2499% on tends. your yield estimate -- your payrolls estimate, 850,000. the payrolls report and america is up next.

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jonathan: here comes the payrolls report. live from new york city, good morning. equity market unchanged, bond market, yields are higher. 1.2499. michael: 940 3000 jobs restored in the month of july, which is extremely good news. better than anticipated. those that had the one .2 million high end are closer than the low end. the unemployment rate declines to 5.4%. i want to look that up and see why that is. it is a labor force thing. it is good news we see that. the average hourly earnings are up .4%, which is more than anticipated. that is a 4% annual rate, and we

sought revisions to the last two months that go up as well. more money, more hours, and more people working. the change in private payrolls, 703,000, less than we saw in the prior month, a little bit less then the anticipated amount. what i am guessing is we have a seasonal factor in education. i will check that out. you take a minute to answer the question lisa has been asking of how will the market react. jonathan: thank you. an upside surprise. futures positive, positive .16%. yields were higher, they are higher now. 1.27 after seeing 1.12 earlier in the week. euro-dollar back through 1.18, 1.1795. we are down one third of 1%. tom: i am watching 30 year bond

to see what it does. 1.91. we have done 1.881 million jobs in 60 days. that is i would look at that with that robust revision. jonathan: the yields are higher and the purpose deeper. the number drops and everybody says what is the mean for the fed. what does it mean for the fed? michael: i am working through some of the numbers that are important to the fed. the unemployment rate dropping as much as it did and then you look at the unemployment rate for blacks and hispanics because the fed focused on that. in june black unemployment was 9.2%, it drops to 8.2%, hispanic drops to 7.4%. that would strike one as substantial further progress. when we look back to february 2020, black unemployment was 5.8%. is still elevated but it is come

down from where it was. tom: i note you have not had the chance to dive into it, but median duration, this is the duration out of jobs, plummets by 15.2 weeks for may 19 level earlier. those are the numbers that give the people under chairman powell some confidence. michael: they will say let's see the september numbers but you get numbers like these in september, that september 22 meeting could be the taper announcement. that is what will be looking for at this point. that is probably what the market is going to price. we are looking at the bond market, i don't know if you have the chance to look at the futures or fed funds, but i bet we will start to see that move in a little bit. jonathan: what you are -- lisa: what you are seeing on the two year is a bigger move there than the 10 year.

it is not that big of a move. it is surprisingly muted considering the fact that so many people put so much emphasis on what the fed does. i am looking at hourly wages. i find this fascinating. hourly wages increased more than expected. a 4% increase in hourly wages versus the expectation of 3.9%. the average hourly workweek increased as well. how significant is this? all metrics point to more hours and more pay. tom: -- michael: two things with the average hours worked. that is the hourly earnings multiplied by extra time at work. more money coming into the economy. we see leisure and hospitality led to the increase in jobs, 380,000 bars and restaurants come up 253,000, tom does not have to wait as long to get his drink. those are the lowering paying jobs. if that many lower paying people

are coming into the labor force it should depress earnings and yet earnings are going up at a faster pace. it does show companies are paying up to get people back to work. tom: equipped data check before jeffrey rosenberg. i'm looking at a bond market that picks up steam. jonathan: equity futures not doing much. yields are higher, the curve is deeper, the yields are higher on a 10 year by five basis points to 1.27. it is an upside surprise. 943,000. tidy revisions as well. tom: jeffrey rosenberg joining from blackrock. doing wonderful work at multi-strategy. is it a regime change today when you see the revisions, when you see 1.81 nonfarm payrolls over 60 days, does it shift the blackrock view? jeffrey: it is a good question. i was thinking the exact same

thing. we have had a lot of negative surprises focused on the delta variant. it is important to remember this payroll report is pretty the cdc mask wearing change and guidance, it does not incorporate more recent changes. yet to the extent we follow the pattern we have seen in india in the u.k. where the variant surges but it is not a permanent surge, we could be seeing the peaking of the negative news that has been about the second derivative and the slow down, that has manifested itself in a protracted rally in interest rates since interest rates speak at the beginning of march. the next focus in terms of average hourly earnings, michael mckee is spot on. it is hard to digest and decouple the shift from the underlying data. it is a strong print, even with

the big shift mike was highlighting, and that will turn the focus on inflation. if we add labor market strength -- let's be clear -- this is a very strong report across all metrics. there is very little you can point to hear that is disappointing. if we add to that some signs of a broadening out of that inflation we are seeing in the wages, this could be that regime shift in terms of the direction we have had on interest rates. jonathan: if the fed meeting was tomorrow, what would they decide? jeffrey: someone talked about the taper discussion. the fed is very focused to separate the interest rate tightening path from the tapering discussion. when you look at that bond market reaction and earlier we were looking at talking about

the two year versus the back end of the curb. still pretty muted response in the short maturities of the treasury market. actions in the back end of the curb tells you the market is separate the path of tightening from the pace or the calendar on tapering. if anything it pulls forward tapering. the fed is being very clear they want to avoid the taper tantrum. remember, the taper tantrum was about the market conflating tapering with earlier tightening. this will not be an earlier tightening but it could be an earlier tapering. jonathan: that is what president kaplan tried to do, d-link his commentary about q. week with any commentary about a hike in rates. michael mckee come is there reason to believe this can persist into september and is this a stress test for the theory that if you remove additional unemployment

insurance, workers will show. some people of made that argument. is there proof of that this morning? michael: no proof this morning. we do not have data that shows that. the research that has been done suggest there has been no effect. in two weeks we will get the state employment numbers and will see if any states that, for unemployment benefits see a rise. one thing that may be at work is in the summer, schools are never in session. the daycare issue may have not been a problem in the sense of the seasonal adjustment that is done. they expect people to be out of the labor force to a certain extent. let me also mention that the education component that was expected to add to jobs certainly did. jobs in education, 223,000 more in the seasonally adjusted area

that in nonseasonally adjusted. they've added 233,000 jobs to the total. otherwise we would've had 720,000. a major seasonal adjustment. the issue is does anybody at the vet care about the seasonal adjustment when they're trying to think of whether there is substantial additional progress. lisa: jeffrey rosenberg come as an investor, what you do with this information? jeffrey: i think this is a possible shift in the rate dynamic. we have to follow this up with some inflation data if that is going to be the case. going back to the labor market piece, you look at what is driving the fed and market expectations around the fed. it is labor markets and it is inflation. on the labor market side it is contributing to accelerating, mostly the taper discussion. i think the fed will do a lot to separate taper from tightening.

that is the main takeaway. i want to add there is some little piece of information that participation rate did pick up .1%. that is helpful. we will be focused on that participation rate as we roll off the rest of the unemployment insurance, whether the supply-side starts to ease and we start to see the labor market grow from that. lisa: does this report change the balance of risks with respect to overheating in the economy are going into more of a stagflationary environment? jeffrey: i do not think it does. i think you've had that balance of risk. look at richard clarida does speech from a couple of days to get -- look at richard clarida's speech from a couple of days ago. he highlighted inflation. there are hawks and doves in the market. i think the balance of risk to higher inflation is something we had before the report, but

certainly this report particularly, what might highlighted, average hourly earnings reinforces the risk on the balance of risk being towards higher inflation. michael: jon ferro -- tom: jason furman with a blistering tweet, he calls it a wonderful set of data. neil dutta says this is a massive start to q3. jonathan: is what we all wanted to see. jeffrey rosenberg of blackrock, great to catch up. 943,000 the number, 870,000 was the estimate. an upside surprise and a nice upward revision. it means nasdaq futures are lower .33% come s&p 500 futures firmer .1%. your 10-year gilts up about -- your tenure yield -- your 10 year yield up five or six basis

points. that is quite a turnaround. tom: i will dovetail this report into what we see in the mohamed el-erian s8 in the washington post. it is not that he has to modify the essay but he may be more strident about a need for fed action. jonathan: that is the conversation i will have. mohamed el-erian, michael collins, rick rieder, anastasia amoroso. the best lineup to get the reaction to the payrolls report. that show starts in 17 minutes. tom: the secretary of labor will be with us as well. michael mckee, i want to go to you. buried in this report are two reports. there is nonfarm payrolls and there's a completely different report. i remember david malpass was yelling when they paid any attention to it. what does the household report say versus the more popular nonfarm payrolls? michael: it gives us an answer

as to why unemployment fell. we did not see a huge change in the civilian labor force. last month was 151,000. it is not that many more people looking for work. a lot more people getting work. the number of people who got jobs, 1,043,000, whereas 782,000 fewer people were unemployed. this is the exact thing you want to see in terms of good news for unemployment. also in terms of employment, we saw 1,043,000 come back and get jobs in the household survey. they had declined last month. a nice rebound there. the household picture is very good. the household survey includes people who are self-employed, gig workers, people like that, which the established survey does not show. lisa: i want to double down on the average hourly earnings.

year-over-year it increased 4%. if you strip out the disruptions that were compositional in nature over the past 15 months, this is the highest read in decades in terms of wage inflation. at what point does this start to matter to the fed? are these numbers clean enough for this to indicate pay is going up and it will bleed through into underlying pricing in a material and sustained way? michael: we will need a lot more information. as i mentioned, because the jobs coming back are lower paid, there is something going on. our companies and spending more money to get people back to work and then they stop raising pay? that is what the fed will be concerned about. a lot of what people are getting is one time bonuses to come back. we do not know whether there is a wage component to a wage price spiral. we know prices are up. the fit does not think that will continue. we do not have the evidence if wages will go up.

lisa: there was an article in the wall street journal showing when they gave the one time bonuses existing employees said what about us? you start to get bleed through races and compensation everybody because otherwise people would leave. you start to have a bleed through affect. tom: you saw that in the vanguard bond. michael mckee, thank you so much. much more from michael mckee throughout the morning as he dives into this data. gina martin adams now on the equity market consequences. ich earned inequities death ic h -- ic a -- neil dutta suggests this is a bang up start to q3. how will this change the estimate game? gina: analysts are still pretty cautious on the outlook. what i see is a into more

defensive strategies driving the market higher. we have much faster than expected growth and persistent growth, those two things are very important. we get both of those over the course of the next several quarters, we will continue to see revisions. so far analysts are only revising estimates higher because the second-quarter numbers beat. that is been consistent throughout the pandemic. analysts are cautious with respect to the outlook. even though numbers are still going higher they are only going higher because companies are telling them they should go higher. we continue to see numbers like this. we will see a massive revision probably into 22. tom: how has use of cash changed or your guesstimate of use of cash? robert shipman published a $40 billion share buyback on microsoft. they have the powder to do that. in all of bloomberg intelligence, how has use of

cash changed to sustainable market? gina: this year it has been all about buybacks. to the degree they are willing to part with their cash, which is still a limited amount of companies doing so, they are spending it on re-engaging buybacks they cut in 2020 and increasing buybacks over time. they're are also buying companies. we are seeing m&a trends improve and we have seen that since 2020. what they are not doing, and where we have the greatest potential to sustain a faster pace of economic recovery is capital spending. companies are not spending cash on future business potential outside of buybacks and m&a. we have to see capital spending improve. just to get capital spending

back to sales we should see capex rise over the next 12 to 18 months. if we get that kind of figure that will increase the confidence analysts have an increase the durability and perceived rate of growth we are likely going to see over the course of the cycle. lisa: stick with us. parsing through the numbers, michael mckee is looking through the more granular aspects of the report. we talked about corporate earnings coming in so much hotter than people had expected, yet economic data lagging behind. perhaps the economic data have not put up with itself. what are the details? michael: you're looking revisions to the prior month's, you look at the numbers added back for june and may, 930 8000 jobs were created in june. we had thought that was 850,000. significantly better report for the month of june. total, 119,000 over those two months.

job creation has been stronger than we thought it was. we had reports that were disappointing, turns out they were not as bad. lisa: gina martin adams still with us and i'm looking at the action in the equity market. nasdaq futures underperforming the s&p, which is basically flat. nasdaq futures down less than .5%. from your perspective, if the nasdaq can post gains through year end if treasury yields continue to rise? gina: very unlikely. at least they will lag the s&p 500. value centric segments of the market driven by an environment where they provide inflation risk. in my mind the recovery we saw over the last couple of months was about analysts and investors

getting more cautious about the growth outlook. we continue have surprises on growth, inflation numbers come that trade deflates over the course of the year. tom: gina martin adams, thank you so much. we now go to bloomberg intelligence ira jersey, just wonderful on bills, notes, and bonds. what kind of move is a substantial move for the bond market? let's use the 30 year bond. 1.91. where does it clicked in this is priced down, yield up? ira: i think it has to be for the 30 year over 2%. 2% is just a number. 2.05 or 2.06 is a more important technical number. one of the things the jobs report does show is we are making some progress and is this substantial? the answer is no. when you look at what i call the

paycheck of the economy, you look at aggregate labor income, hours worked times the number of people employed times their average hourly wages, you see we are growing only a 2%. we are not quite back to the trend we were prior to covid in terms of aggregate labor income. if the fed is looking at the entire job market and how that will affect the economy and retail sales going forward, this is a step in the right direction. it is not done. i agree with what jeffrey rosenberg said earlier. i think this maybe helps pull taper forward. i think we might get taper by the end of the year. probably not announced in september, but november for an immediate taper, and then from there the question is how fast do we grow beyond that, and that will ultimately determine when the fed starts. tom: kevin judge at cibc in toronto frames the taper in

q1ish of 2022. what is the differential between a taper in november, or a taper in april of next year? what is the so what of that? ira: it is twofold. the federal reserve is still buying a large share of market at a time when the treasury department will be decreasing the amount of bond it is issuing . it looks like in november the treasury department will start issuing less two years, less 10-year note. as they do that, they wind up with a supply dynamic shifting where if the fed was still purchasing a lot of securities you probably get lower yields than now because the treasury is reducing supply there still a lot of demand for treasury securities. what does that mean? in large part it means it will still be hard for the market to have a taper tantrum like event where we get 100 basis point move in two months.

it does not mean we cannot move substantially. a lot of our models, most of our models show around 1.5% is fair value for the 10 year treasury. we still have another 25 basis points to go before we get to fair value. typically overshoot a little bit. i think it is most likely that by the end of the year we will get back into the range where we were the february to may time period where we were 1.50 few basis points at than the market will reevaluate what is the path of the fed and the path of the economy. lisa: in the bond market action there is more action in the short-term than the long end. not as much action on the front end. the indication being people do not expect the fed to pull forward in their rate hiking cycle that much. perhaps a taper, but not rate hikes. do you think that is actually how it will play out?

ira: i think that is exactly right. that is exactly what the market is telling us. the fed will be buying less of the market and taking out less interest rate risk, and because of that the long end winds up being a little bit more susceptible to selloffs. meanwhile, i'm looking at eurodollar futures, looking at silver futures. all of those, little bit at the margin increasing the risk of a 2023 hike, but not very much. it is more they will go later but maybe go faster. that is priced into the eurodollar market right now. tom: faster in an alan greenspan way or do we get let's clear the markets in november and onto 2022 with some rate moves? ira: i do not think for the federal reserve -- my personal opinion is they will not hike before 2023. there are always some bumps in the road that ends up letting

you be more cautious. even if they start in november, they will not be done tapering until june or september, depending on how fast they go. in an environment like that come the earliest they will go is late 2022. a lot of members have talked about late 2022 being when they expect a hike, but i think that is too optimistic. at some point we will get some pickups. it might not be pandemic related, it may be supply chains were another trade war, something like that that causes the fed to pause for a couple of quarters and then finally they start hiking in 2023 stop tom: ira jersey, thank you so much. i want to point out the red and green on the screen is blinking. there's a lot more energy 26 minutes on from this jobs report that i would usually see. lisa, an incredibly important factor from kathy jones at charles schwab, where she takes

the good news of this jobs report and says when we get back to valentine's day? the answer is two years out pre-pandemic gets us to the good news february of next year. lisa: this is the key issue. these are fantastic numbers. we need more of them. it might be soggy in certain quarters, whether it is the bond market selloff or the nasdaq dipping low. this is great news that people are getting back into the market. participation is increasing. the hourly wage increasing. all of this is positive for the worker. people need to talk about the millions of people still unemployed and out of work, which is the reason economists after investor come on the show and say accommodation is still necessary. that is the argument on the others. tom: andrew hunter of capital economics notes "acceleration."

can we define substantial further progress as this moment? lisa: now. we can try -- no. we can try, but i think jay powell say this is further progress. interesting to see when he starts to say substantial. all of the fed officials have said it is not just one report. tom: oil bounces back. gold down $29. markets are moving to this combined 1.8 million jobs over 60 days. lisa: the idea we had the upward revision to last month is that it looks much worse than it was. we are having a succession of positive jobs report, and how much this changes the dialogue is important. i also think what jill carey hall said was interesting. a lot of people are looking to consumer discretionary companies and how much they might have to pay their employees more as these wages increase.

we are seeing this across the board. company after company offering benefits to bring people online and having to broaden out how much the increased pay. tom: we will keep this dialogue going. this is truly within this natural disaster we have all faced, a historic day. coming up, discussion with jonathan ferro. mohamed el-erian of queens college, cambridge for that important washington post column. jerome schneider will join us on bloomberg radio in moments. he is outstanding on the short-term dynamics of the bond market. stay with us. this is bloomberg. good morning. ♪ jonathan: is a as payrolls report in america. from york city for our audience worldwide, good morning. 30 minutes away from the opening. "the countdown to the open"

starts right now. >> everything you need to get set for the start of u.s. trading. this is "bloomberg: the open" with jonathan ferro. ♪ jonathan: from new york, we begin with the big issue. fuel for the fed debate. >> all eyes are on the fed. >> a sense of tapering. >> what happens with the payroll reports. >> we are back in an environment where investors are scared of the fed shadow. >> we think getting back to full capacity will be an important marker for the fed to start to taper. >> missing piece of the puzzle. >> markets want to see a continued up at fed. >> positive