>> you are starting to see inflation peak, where are we going to level out at? >> i don't know if we are going to unravel. >> there is a lot of room to go for financial conditions to tighten and for the fed to deliver on the hikes. >> the question is will there be further shocks to the system that mean inflation stays elevated? >> this is "bloomberg surveillance." jonathan: five from new york city for our audience worldwide

good morning, good morning. , this is "bloomberg surveillance, live on tv and radio." alongside tom keene and lisa aronowitz, i'm jonathan ferro. a race from home depot. tom: a beat and a race at 8:30 with retail sales. that is not home depot. but resilient consumer, michelle meyer sat with mastercard. jonathan: bottom-line results unexpected. lisa: trying to understand how much this is a supply chain story, basically the unraveling of the buy cheap goods and sell them for a small margin a small margin story that walmart perfected so many years, as we get a lot of supply slowdown from china. jonathan: company saying the results reflect the unusual environment we are in right now. most people would agree with that. tom: down or percent premarket

on walmart. it will be every company for itself -- down 4% premarket on walmart. it will be every company for itself. importantly, the ability to handle the inflation. jonathan: the numbers and home depot speaking to that, the fact that transactions were down but the average ticket prices were up. that is an important story. tom: everyone will parse these dynamics of inflation, unit dynamics as well as price dynamics. there are two pieces to revenue, how many units you move and the price change of those units and that is sometimes underplayed. jonathan: futures up 1.6% on the nasdaq. yields on a 10 year look a little something like this, higher by three or four basis points. euro-dollar up by .8%.

the euro just stronger. lisa: basic lee saying any down tied -- basically saying any down size, haven't priced in how hawkish the ecb could get. we had data that showed an up side beat. jonathan: chairman follow -- chairman powell a little later. do you think he has something to say after we have heard from former fed officials thinking he is not doing a good job. lisa: a former fed chair came out and said they waited too long. an increasing number of academics on both sides of the aisle said the fed missed the boat. how does he defend himself, say he is going to stay the course? how does he take the narrative

away of people saying they are on the back end of this? jonathan: joining us is the chief economist and head of global economics and markets research at goldman sachs. when you cut the outlook, let's start with why? >> we cut the outlook because there has been a very material tightening in financial conditions. financial condition indexes up by more than 200 basis points from the end of 2020 to 2021 and we think that is going to keep growth below trend over the next several quarters or year or so. so we are looking for one and a quarter sent growth on a fourth quarter two fourth-quarter basis and one and a half next year. that is needed to create more capacity in the labor market in particular, alongside an

improvement in labor force participation, because we have a huge gap between labor demand and labor supply. we have 11.5 million open additions and 6 million unemployed workers, and that cap needs to shrink, as chairman powell has said. tom: i do want to talk about sub 2% gdp. domestic final sales review of the american economy versus export-import dynamics on the others. your colleague throwing in dynamics as well. it is a form call or a domestic call? jan: it is a domestic call mostly. that is the main driver. first quarter had a lot of noise. some of that will unravel, but i think it is really about higher interest rates, lower stock prices, somewhat wider credit

spreads and to some degree the appreciation -- depreciation of the dollar. this will primarily impinge on domestic demand, slowing growth to a much slower pace. tom: do you see any indications that the labor market is easing in the micro data you are looking at every week? jan: not in the data, no. there are signs in the more anecdotal reports, company to company, tech firms scaling back hiring. in the hard data published, not yet. lisa: how height is unplanned have to get to reach that spare capacity you are looking for in the labor market? jan: i don't think the unemployment rate has to rise a lot. what has to happen is companies ring down open positions. the path the fed is targeting is to slow growth to a pace that is slow enough for companies to

shelve expansion plans and bring down open positions but not so slow that you start getting large numbers of layoffs. we are expecting a little bit of increase in the unemployment rate from the 3.5% range to the 3.25% range, but not a large increase. lisa: do you think michelle meyer was correct when she was talking about the ability for consumers to lever up even if incomes aren't keeping pace with the inflation rate and that basically the fed has to go faster even still than people think in order to slow that, otherwise we will get more overheating? jan: i think of borrowing is going to be a short-term driver of the spending and has been to some degree if you look at the consumer credit numbers over the last couple of months, there has been re-leveraging to some degree, but i don't think that is going to be a lasting kind of

support for spending. i think consumer spending is going to be relatively slow. income is going to be quite weak in 2022 p we are looking for only 0.5% real income growth on a fourth quarter two fourth-quarter basis -- 2022. we are looking for only a 0.5% real income growth on a fourth quarter to fourth-quarter basis. tom: there was a young whippersnapper from germany, and you codified mortgage equity withdraw. let me cut to the chase -- when does the housing market break? jan: mew is a very important issue, not as important as going into the 2008 crisis, but there has been a pickup in mortgage equity withdrawal over the last year, and you have the increase in consumer credit as well.

a similar kind of dynamic to support spending in the short term but ultimately is not going to be a sustainable source of big increases in spending. so a slowdown down the road. i think when the housing market slows, of course it will determine the timing of that. haven't really seen significant slowing and the hard data yet. i do expect mortgage rates up even more. tom: i just ask because ferro wants to know if you should buy in june or july. july. jan: i don't think i will give advice on that. jonathan: what is the biggest risk in your view? jan: the fed is trying to slow the economy and a slow employment and bring down open

positions, because they are still worried about inflation being too high. it will be well above target for the foreseeable future and i do think it will come down, but if it doesn't come down quickly enough, we could see significant levels. our call is 3% to 3.5 -- 3.25%. we have stuck with that but the risk is they have to do more and that raises the risk of a hard landing. that would be the risk. jonathan: the upside risk to rates. thank you jan hatzius jan hatzius , goldman sachs. walmart stock down 6%. the ceo saying u.s. inflation levels particularly in food and fuel created margins in operating costs more than we expected. tom: i went to michelle meyer on

that with all of her wonderful work at bank of america and now at mastercard. it is even a five percentile study and the summer is simple, the middle class gets crushed and that is what walmart is seeing. jonathan: you can pick your data point and pick your price. they will speak to walmart for a less outlook. lisa: as they deal with the increase in material prices and try to absorb more to keep prices low because they have a more price-sensitive clientele. how much are they a precursor to other stores that we will see with margin pressure? that will be a big question how much they will absorb and how high can they raise prices. jonathan: stock is down more than 6%. features positive, 1.6% on the s&p. from new york city, for our

audience worldwide him heard on real -- heard on radio and seen on tv this is "bloomberg , surveillance." ♪ ritika: keeping you up-to-date. elon musk says he will go ahead with his $44 billion takeover of twitter but only if the company can substantiate its claims about the proportion of bots of the service. he believes the number is higher. twitter said it is committed to completing the deal at the agreed upon price. turkey's president has put the brakes on nato's nordic expansion he will not allow sweden and france to continue. defense ministers are confident it can be resolved.

gdp growth 3%. pent-up demand and large amounts of savings. the war in ukraine has added to stoking energy prices and added to record eurozone inflation. home depot boosted its outlook after a surprise increase in first-quarter revenue, growth at 2.2% with strong demand for home improvement supplies despite rising interest rates. worn buffets berkshire hathaway said goodbye and made a big bet and he ended his long-running investment in wells fargo. berkshire has invested $2.9 million into a group with a new ceo. global news 24 hours a day, online and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i'm ritika gupta.

this is bloomberg. ♪ at fidelity, your dedicated advisor will help you create a comprehensive wealth plan for your full financial picture. with the right balance of risk and reward. so you can enjoy more of...this. this is the planning effect.

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>> they will receive a report i'm sure.

it increases our unity and makes us stronger. jonathan: that was the vice president of the european commission. from new york city, this is "bloomberg surveillance." up 1.6% on futures. home depot, gains in the premarket fade, higher at just 2.2%. dealing with the inflationary stories, the average transaction higher even if the volume comes in a little bit. transactions fell in the quarter but the average ticket price increased. for walmart, down 6.6% in early trading and there is a very clear inflationary hit. lisa: the numbers with adjusted earnings falling to $1.30 a share versus the average of nearly $1.50. they see profits falling by 1%

this year compared with a prior view of mid-single digit gains, all because of supply chains and how much they are having to pay workers. this is the story we were expecting, margins expressed and as they pass the costs along to the consumer. i wonder how much this is turning into a bifurcated story, who can afford the costs and who can't. jonathan: you know what the reaction will be from some, why were they surprised. the ceo saying increased margin cost more than we expected. tom: i can't convey the cultural differences between the house of langone and what they do in arkansas. there is a housing boom and i assume that helped home depot. microsoft and apple, we tend to lump them all in. jonathan: they are different

things. tom: it sets us up for 8:30, the retail sales report is not a small item. jonathan: what is the consumer price tolerance? how strong is the consumer? we have been told month after month that the consumer sentiment in america. tom: bank of america at 6:00 a.m. with confidence numbers week. -- weak. jonathan: wall street, going to the numbers, highest cash level since 9/11, growth optimism at an equity -- at an all-time low. tom: let's talk to emily wilkins from bloomberg government in washington. i will be very careful and cite alice cooper in his great song "school's out, school's out

forever. when does biden clear house and invigorate the white house? emily: if he is going to do that, he may need to do it before november of 2022 because if republicans take the senate it will get a lot harder for biden's nominees to get to the chamber. tom: what is he waiting for? emily: who do you think needs to be kicked out and what you think needs to be invigorated? have seen biden with those who deal with covid and have seen some changes and a long time to get nominees into position and confirmed and approved. some have not been in position for quite a long time given this administration took control in january of 2021. you have this wide range of things throughout the government

. the issue for the biden administration comes down to inflation and the economy and there is only so much that can be done. he saw the senate go ahead and give jay powell a strong green light for another term. tom: lisa, come on, they are acting like it is a two-term presidency. can they get away with that luxury? lisa: there is a lot of skepticism given the fact that joe biden is the oldest living president to serve in office so far. there is a question about the fed and their role in crimping growth. we are in a strange moment where politicians want both to essentially slow to stave off inflation. how did they message that at a time when people are still able to buy things if perhaps more uncomfortably, they still are. emily: interesting to see how democrats have leveled on

inflation. when you ask, they change the topic to pricing and how they want to make things cheaper for americans, like the cost of prescription drugs or childcare. that is how democrats have been messaging on this and it speaks to the larger issue that there is not a lot they can do to address the concerns of inflation. a big question is -- are they going to be able to pass other major spending bills over inflationary concerns. i am not even thinking about the slimmed down bill back better bill which seems to have no time to come to agreement and the $10 billion that the white house requested for covid funding, something democrats say they still want to pass but are working on. it is something we heard from officials saying they need to combat this pandemic. there is no momentum among publicans to pass legislation like that -- among republicans to pass legislation like that.

we have seen concerns on costs spill over in things as popular as newport -- support for ukraine. concerns in the house and senate delaying progress on that legislation. jonathan: you have two choices, you can make policy with the congress you have or you can try to make policy for the congress you don't have. if you do the latter, you are not going to make policy. at the moment i hear less about policy and more about blame elsewhere, corporations not langone of tax. you have to focus on making policy for the congress you have. tom: maybe that is the reddish weight but in america we are polarized and basically there was an election and we decided to believe there was a strong democrat majority and the gentleman from west virginia and they pushed against that. the bottom line is it is much

more polarized in the thought a year ago. jonathan: the 50-50 senate split did not speak to that at the time. tom: i think 20 years from now they will be writing about this. it reminds me of the 1890's. lisa: nuance doesn't sell. you have no cohesive plan from republicans either. the democrats are saying it is the corporations and everyone else is saying we don't get what you want to do. jonathan: when it is just about blame, it is about campaigning. futures up 1.7% on the s&p. from new york, this is bloomberg. ♪

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jonathan: pick your poison this morning. equity markets doing nicely. the s&p up 1.6 7%. the nasdaq up more than 2%. i said a little bit earlier you can choose your data point. home depot, walmart. just confirm your priors for your outlook. transactions a little bit softer, but the average ticket price whole lot higher. that is the story for them. same for walmart. surprised, really?

that stock is down a whole lot. romaine will run you through that in a moment. the fund managers survey from bank of america, the biggest underweight we have seen since 2020. growth optimism the lowest on record. have we priced enough at the front of the yield curve in america? bank of america, mark cabana things we can get to 3.50% on the two-year. michael hartnett of bank of america saying the following. he thinks we have not seen for capitulation just yet because he believes, because we are still looking for rate hikes and not rate cuts, we are not there yet. tom: what is important is the capitulation and what it does not to the equity market, but what it does to the bond market. it will be fascinating to see that emotion of capitulation and what it does to the 10 year. jonathan: let's go to euro-dollar. this is how deutsche bank is

thinking about it. what tom just said, when you start pricing into much, recession risk, financial conditions get too tight, the fed has to back away, but the ecb can step in and hike rates. that is the scenario. may be getting a little bit too cute. that is your opinion. but that is the situation deutsche bank is looking for. lisa: people are pretty heavily positioned to this idea that we could get to parity with was back to the euro and the dollar. at the same time we are getting better-than-expected data out of the euro zone, at least today. we will see about tomorrow. they are more exposed to china and the oil prices. jonathan: euro-dollar right now, one of 5.03 -- 105.03. let's say good morning to romaine. romaine: we did get earnings this morning out of home depot and walmart. an upside surprise for home depot, a downside to price for

walmart, despite the divergence in those stocks. story for both of those companies is pretty much the same. walmart down about 7%, home depot able to make up for some of the softness and foot traffic by higher ticket prices, but a lot of that appears to be somewhat adjusted on an inflation basis, even though the company does not break down. doug will and at walmart -- doug mcmillon at walmart saying the inflationary pressures on consumers, particularly when it comes to fuel and food, causes a different mix in what people were buying. you get the idea that consumers at least over at walmart appeared to be making some trade-offs about what they can and cannot afford, and that is the big set up heading into that 8:30 am retail sales report in the u.s. meanwhile, last night united airlines said they are expecting a pretty good summer, reaffirming a lot of the guidance for the year and saying they are still seeing a pretty good groundswell of consumer demand. at the same time they did talk about higher jet prices and their ability to continue to

pass some of those on through to those ticket prices. for now, investors like what they heard. shares higher by about 5% on the day. you talk about warren buffett and what he sees in the economy. those thursday night filings finally closing up at stake in wells fargo, taking the steak and a lot of consumer lenders, including citigroup. those shares higher by about 5%, and ally shares also rallying this morning. maybe buffett and his team seeing some opportunity there on the credit side -- or the loan side, i should say. in china, headlines crossing the wire a little while ago with regards to that meeting with a lot of the chinese tech companies, the vice premier saying the chinese government to support these platform companies. those shares higher by about eight in the premarket -- by about 8% in the premarket on alibaba. in the u.s., twitter shares continuing to sink lower, down about 1.5% on the day as you continue to see a lot of nonsense going on with what elon

musk may or may not do. tom: romaine bostick, thank you so much. more this evening on walmart and home depot. it is yield up and price down. that is the mix for something rare in the last decade, a bond bear market. winnie cisar is global head of strategy at creditsights. you can talk about spreads, analyze loans in different categories, and the answer is price is down, and she joins us this morning. i want to look at the bloomberg total aggregate index, total return aggregate, full faith and credit index, and the answer is we are down 12% in price, 7% and last. can you state it is a bond bear market? reporter: -- winifred: it feels like we are in a bond bear market get investors are seeing a lot of signs of continued negativity. don't fight the fed is definitely the mantra, and the fed seems to be on a very hawkish course to continue to

hike rates. that being said, there are some signs of constructive positivity on the credit market side of things. tom: in the equity market, i clawback on growth. i clawback on use of cash. how do you clawback from a 12% loss, frankly in ig it could be an 18% loss? what is the strategy to clawback in fixed income? winifred: in fixed income we had two phases of the selloff. first it was all duration. we have seen a longer duration selloff as we saw big sensitivity to the moving yields. now with everybody concerned about growth, we are moving into the credit risk phase of the selloff. this means you have to be very selective in terms of where you are positioning your risk. that is actually a very good sign for these dedicated credit investors who have longer-term views and longer-term mandates rather than a three to six time horizon like we usually see in the equity market. lisa: when you take a look at

the corporate fundamentals, which sectors are starting to feel the biggest hit from some of the weakness that at least we saw and walmart, if not beyond? winifred: we're definitely seeing a shift away from some of the covid pandemic darlings, some of the consumer staples and retail side of things, but we are also seeing a continued improvement in energy fundamentals. while we might not hold energy prices where they currently are, the levels are still going to be quite strong for cash flow and credit investors, and we are seeing some idiosyncratic skin some sectors, things like high-yield health care and high-yield telecom. we are seeing some single name stories driving outside spread widening in those sectors. lisa: yes, borrowing costs are a lot higher, but companies don't really have to borrow. if they don't? have to borrow, does it matter? -- if they don't have to borrow, does it matter?

wind they have to start borrowing at yields that are incredibly high compared to a year ago? winifred: the yields are high relative to one year ago, but let's not forget that one year ago was the absolute rock autumn for borrowing costs, he level that we are probably not going to see again at least for a long bubble of time. even if borrowing costs have moved up by 100, 1 hundred 50 basis points in investment grade , from a long-term perspective, that is still a very low level of borrowing costs. the amount of no issue we have seen this year has been quite robust because a lot of companies are looking at this current borrowing costs and saying this is actually still not a terrible time to be continuing to add to the balance sheet, continuing to refinance transactions. in the high-yield market, that is where we have seen the most liability management, really giving a lot of these issuers a reprieve from having to go to the capital markets, and we probably have another 12 to 24

months before there is really a lot of urgency, especially for the higher rated arts of the high-yield market, the bb issuers. lisa: this presents a real issue for the fed. we talk about this on the consumer side with michelle meyer of mastercard. if a lot of these companies are immune to more substantial fed rate hikes at a financing level, how high can the fed raise rates before it presents a credit issue? winifred: i think the way the fed looks at the credit markets is functioning of capital markets. is there investor demand? for the investor market in particular, deals are still pricing, albeit at pretty steep issue relative to last year, and order books have been relatively solid, so i think the fed is looking at the investment grade market and saying there are clearly some technical challenges going on in this market, but from a borrowing perspective and pure liquidity flowing, we can continue to hike rates. we are in kind of the approach to the danger zone, 150 basis points of spread. you usually don't hold that for

very long and the ig market. you break one way or the other. if you break to 200, that is when the fed has to take a little but of a pause and say our capital markets still functioning. jonathan: winnie cisar there of creditsights. we are approaching the danger zone. sound like something you would say in the credit market. lisa: you know, it's what i know. jonathan: we are starting to see a move in spreads. starting to price in some credit risk. most of the year has been about interest-rate risk coming off starting to price in some credit risk. lisa: people are starting to price and what could be a potential recession at a time when a lot of companies don't have near-term maturity, so even if there is a recession, you could get a scenario where the fall rate does not pick up all that much. how do we deal with that on the credit side, and what does that mean for the fed? again, all of these letters that would normally get triggered when the fed raise rates, whether it is the consumer or the corporate sector, are not going to get triggered as they raise rates this time, giving them a lot more leeway to raise rates. this is a new paradigm than what

we have seen in recent years. jonathan: we are so used to the idea that financial conditions tightening the fed backs away. this is different. the pressure is off them not to back away -- is on them not to back away, at least through the summer. many people think we get through the summer, the fed reassesses, and they do back away. when you ask many people the three-month price target, it is where we are. asked them the 12 months. this belief that the fed backs away, that we have priced enough and and things start to improve, we will see. tom: whatever anybody does, the fact is rates moving is nonlinear. the question is when does that nonlinear feel break in. i would suggest it is not june, but maybe july or the meeting after that. jonathan: i'm focused on jackson hole, august. tom: it is ok. it is a little early in the morning. jonathan: it is going to be an important meeting for the powers that be over at the fed and the central bankers.

tom: i can see the cam overlooking the swamp with the elk in the distance. lisa: cue the plea for the road trip. jonathan: i think for global central bankers, that is going to be an important moment. what is the trend for inflation through the summer? lisa: how many more 50 basis point rate hikes can they do? jonathan: this is bloomberg. ritika: keeping you up to date with news from around the world, with the first word, i'm ritika gupta. elon musk is casting more uncertainty over whether he will actually by twitter. musk says he won't move ahead with his $44 billion takeover unless twitter can prove that bots make up fewer than 5% of its users. musk has said he believes there are far more fake accounts. meanwhile, twitter says it is committed to completing the deal at the agreed-upon price. shares of walmart are falling. the world's largest retailer missed analyst estimates on first-quarter earnings and

skilled back its full-year growth outlook. all mart also missed on its growth margins, citing higher supply chain costs. the u.s. senate has overwhelmingly voted to move towards passage of $14 billion in aid to ukraine. monday's procedural vote sets up senate passage of the legislation as soon as wednesday. the package of military and humanitarian assistance has been held i republican rand paul, who has demanded changes. treasury secretary janet yellen has called for a large-scale assistance to ukraine. she says it needs to be similar to the marshall plan that helped rebuild europe after world war ii. yellen said the money pledged so far won't be enough. abbott laboratories reached a packed with u.s. authorities that would allow it to begin making baby formula again at a troubled plant in michigan. that could help ease a shortfall that has rattled many parents. the plant has been shut down since february after four children who had been fed formula made there were sickened by bacteria. two died.

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. ♪

>> for the first time in fed history, we have two policy tools, the balance sheet and rate hikes. it may be able to escape crashing the economy to bring inflation down to its target level. jonathan: that was bill lee, the chief economist at the milken institute. this is "bloomberg surveillance ." crude pushing higher by 1% to $115.30 on wti. euro-dollar stronger on the euro side. that currency pair marvin -- pair moving 1% and some. steve englander publishing some

thoughts. "still think the market is too aggressive on fed hiking expectations and the ecb is just beginning to step up its language on normalization, and that is a big part of the dollar weakness we expect in the second half." tom: but how much dollar weakness? you can get a resilient dollar. i think mark mccormack of td securities has been brilliant on this. is it out to 102 dollar weakness? jonathan: give me the reason why the fed is going to back away, and if it is because of week growth in the ecb is hiking into that, typically when the global growth story weakens, i'm going to the u.s. dollar, not away from the u.s. dollar. tom: i'm sorry, the script get they are going to wait for the economic data. the next meeting is somewhat of a layup, and then what? that is the beginning of the summer. jonathan: more boring than that.

the data is in. they got to make the move, then they collect the data over the next three months and reassess things. that is the guide i'm hearing at least from chairman powell. we will hear from him a little bit later tom: give me an intraday on brent crude, folks. right now on radio, all you need to know is from the lower gartman left to the upper right, working outcome around that moments ago at $116 a barrel. jonathan: wti, a push higher. tom: walmart is one example, pumping a gallon of gas doesn't make up for what it does inside the box. jennifer is with us with bloomberg intelligence, truly expert on what is inside the box. what is the battle at aisle 14 of a given walmart coast-to-coast? what is the battle in a given aisle 14? reporter: battling the i/o is

the food inflation that is happening and inflation and some of the other categories where it is really affecting the way consumers are spending, and it is changing the mix of what they are spending. walmart has to combat these rising costs on their side and hold back increases as much as they can. tom: ok, stick to chicken. that is what we saw with tyson food. if we go to walmart.com and i look at a stake because the abramowitz clan is coming over tomorrow, $29.30, $12 a pound for usda choice stake. people are substituting, aren't they? winifred: -- reporter: absolutely. people are trading down into cheaper proteins. that is where people are going to chicken, they're going to other things. that is happening across lots of different categories. people are stretching their budgets. but what is interesting when we look at walmart, it is sort of that canary in the coal mine for the retail industry. traffic stayed the same, so

people are still going into stores. inflation is pushing the top line up. but people are spending their money. tom: i'm sorry, i mentioned stake in poultry as well. i see that suncor foods organic gluten-free, black seeds, 15 ounces are what people are rotating to. lisa: thank you. that's what's on the menu for tonight's dinner. i do wonder how much we are seeing the breakdown of a model that for so long was the classic american model of basically selling a lot of things cheaply, and the way to do that was by importing things, by not paying people a certain amount or past a certain hourly wage. there's also a host of other ways they made this work. is this model broken? winifred: -- michael: reporter: i'd -- reporter: i don't think it is broken, but it is in the

beginning stages of evolving even further. we are seeing where wage pressure has altered things, that all of these companies are paying higher wages, which is a good thing. but the model itself, and terms of finding ways to offset higher costs, are really where the focus is. how can you improve your supply chain, your transportation? that is really where the focus is. lisa: how much is walmart an outlier, and how much is it 18 leaf for what is to come for other stores? reporter: traditionally walmart generally perform was well in almost any environment, so it is a company a lot of people look to to get a sense of how the overall average consumer in the united states is behaving. when we look at where that consumer is spending, it is discretionary. it gives you a readthrough to some of the other retailers out there. so it is important in that respect. jonathan: 14 to get you thing that your view on things.

what has been the biggest change over the last few months, the last nine months compared to the previous cycle? used to talk about cheap money underpinning the valuations, underpinning the business models of say an uber. it is the price of labor. when we used to think about uber , we used to talk about free money, cheap money funding these business models that were ultimately unsustainable. the element of it we did not talk enough about was the cheap labor aspect. that was the biggest point, and that has been a massive change is affecting many of these companies. lisa: so how do they change the model? is it just that consumers pay more or is it automating more processes to get more efficient to mix? people would say this is a welcome change. workers should be pay more and people were working below the

poverty line. i know i should not be able to say that on "surveillance," but it is the truth. so if we are moving towards a more sustainable model, how do we get there? jonathan: some companies will not survive in that world. if we get there. tom: that is normal in any shakeout as well. this new labor market is going to be a huge deal. with american ceos at davos, is there any other topic? i don't think so. it is about labor. jonathan: it is more than the macro babble. it is things about the transition. it was easy to talk about the transition a couple of years ago at the world i cannot form. i would say it is little bit hard to joke about the same thing now. really tough. tom: it is going to be interesting, to say the least. one thing i would say is the consensus i saw over the weekend is the wage spiral fear is not in place yet, even with the labor dynamics jan hatzius talk about in this hour. jonathan: in the u.k. it might

be start to be biting just a little bit. maybe that starts. lisa: i've got to say, i wonder how much the u.k. is a model for what is going to happen in the u.s.. people are saying it is completely different, bitten by brexit, all these things. about the same time, it is the s word. tom: there's a job openings at arsenal. jonathan: do you want to take one of them? tom: no, i'm not qualified. you are. jonathan: -- newcastle united were fantastic. arsenal just did not show up. final game of the season this weekend. tom: well, they are underpaid. jonathan: yeah, ok. [laughter] futures up 1.5%. ♪

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>> right now we are just bordering on calling for a recession. >> if we did get one there is a lot more room for spreads to widen and even exacerbate there's losses we have alrea