>> the labor market is still strong. it does paint a confusing

picture. >> you rely on your labor market numbers to tell you what is going on. they have been out of whack. >> this is the post covering -- post-covid recovery we are seeing in the labor market. >> this is "bloomberg surveillance." tom: good morning. on a jobs day, on radio, on television, we welcome you across the nation, around the world to a key labor economy report. all it comes down to is jerome powell says a strong economy, but he needs a weak job market. i do not get it. jonathan: 265 is the estimate for this morning, that will allow them to focus on inflation next week. we talked about it the last 24 hours, 8.8%, the median estimate for cpi, headlined next week. tom: we dovetail into the labor

data, and drive forward to next week. forward to the july 27 fed meeting what does the jobs report mean to the fed meeting? 75 or 50 beeps? jonathan: 75 is the view from -- cursed. the fed president argued we could have that soft landing. i'm not sure how many people see it that way anymore. for percent on fed funds, but ultimately, a recession in the not-too-distant future. tom: we are confident -- the confidence is not there. the michigan confidence numbers and the others are, grim is the right word. how can we have a strong economy and grim confidence numbers? kailey: the dismal conference --

confidence numbers haven't translated to a serious reduction in activity. you are starting to see some sign of spending slowing down, but that is the fact of the matter. sentiment indicators are waning, the activity is not yet. the fed is not vocus on just the sentiment read, they are looking at inflation expectations. that is why -- comes to matter so much for this market. tom: the litmus paper is the foreign exchange market. it has helped us this week gauge emotion, gauge trend. what we've got a dollar on as we've go to the jobs report. jonathan: we are on parity watch for euro-dollar. tom said the ecb might be able to get to zero, they will get stuck. we are heading for recession in europe. euro-dollar gets a bad job, this is going to be hard for the euros economy. tom: we have curve inversion and

negative three basis points. priya missouri, and the last hours, stunning where she thinks twos and tens are going to go. jonathan: she is looking for -50 basis points. tom: two years are higher than the 10 year. jonathan: much higher. equities right now, down .1% on the s&p. on the nasdaq 100, negative two by .4%. tom talked about the bond market at 297.98. let's talk about the equity market, closed yesterday with 3900. our next guest is -- things that is where we end the year. ultimately, consists this -- consensus estimates are high. tom: i'm going to go to two key points. one, the news from washington yesterday on the covering of the dow jones industrial average in the 9:00 hour.

also on the s&p 500, the vix, to give you that bull market indicator, is that 34ish, down to 26.20. tom: i am not forgiving you. jonathan: i am with you. the volatility is a big deal. it is not just the equity market, it is the bond market. tom: commodities, with copper imploding. on to the jobs report, joining us nadia level. what does the stock market do in reaction to a survey jobs report of nicely above 200,000 nonfarm payrolls? >> i think what you are going to see is the pause in this rally. we do not think this rally has much strong legs to stand on. it is not sustainable. i think the fed is going to be

watching the inflation number for next week. we are also going to be closely watching inflation expectations. we know it is expected at 75 basis points in the last month. we are still in that cap of 75 basis points in the july needed, i think that while today's job numbers important, what is more important is next week's cpi number. jonathan: your buyers of energy only pullback. walk me through why. nadia: we would be buyers of energy on this pullback. we continue to believe that rent will be sustainable at $125 until the first half of next year, given the imbalances we see in the market. even if we end in a recession, oil trades and that $90 range, equities are pricing in something in the mid-$60 range. this is a sector unlike the rest

of the market that is still hot, a tremendous amount of earnings from momentum. we are seeing indication from the companies disclosing record profits, cash flows for the upcoming earnings season, freeze cash -- free cash flow is over 14%. returns to shareholders are strong. we look at these companies that have a variable dividend component, you are seeing dividend yields in the did the high single digits. jonathan: you are constructive on energy, many people are. to what extent do you think that is distorting consensus expectations for overruled earnings on the s&p, and is that masking revisions elsewhere? nadia: it definitely is. earnings contributions from the energy sector is pretty strong. if you were to strip out earnings, the implication of this -- would be negative. you are seeing weakness in some of the consumer sensitive sectors like consumer discretionary's, this is why this recent rally being led by

consumer discretionary communication services is confusing to us. we do not think it is sustainable because the estimate needs to continue to come lower. kailey: you are a buyer on the dip in energy, may a seller in the debt in the growthier areas of the market. what assumption are you making about the trajectory of yields, and whether or not we have seen the peak in them? nadia: we think we have seen the peak in the tenure. we are looking for the 10 year to in the -- in the interim, could we get back to 3.5% on the 10 year? yes, even the volatility we are seeing in the bond market. we are ultimately seeing that inflation will start to evade, we think the cpi headline will come to under 6%. we are thinking the economy will slow down, we are looking for the 10 year to settle at three or four. kailey: are we still over four growth yet?

nadia: we think so. we think the pullback in additional volatility ahead for growth, as yields move back above 3%. the valuation for growth is elevated relative to value. we do think a lot of pullback you are seeing and growth is behind, and there are some opportunities, the higher quality growth companies, that you can start to leg into. tom: where's the new 13 on vix? have we had a permanent adjustment of a new or higher volatility? where is the new, massive, bull market 18 level? is it 18? nadia: i think it is under 20. you have not seen -- everyone is waiting for the ball to get to 40. tom: exactly. nadia: that might not happen.

we think we can start to see the bull market emerge, which we think will take some time. we are only six months into the average -- into bear market, we are seeing an economic slowdown. we are not calling for an end to this bear market. we think we are about to have a sustainable -- tom: should i get out of triple -- ? nadia: i think you should wait until after the cpi. [laughter] tom: thank you. jonathan: that will be the first wealth manager to stay in cash. tom: that is true, actually. that is an important point. a lot of people are not in cash on global wall street. i think a lot of our sinners and viewers are. there is a fear out there. jonathan: we are looking for the fed to go 75 basis points in july. it wasn't so long ago we were looking for the fed to pause in september. that shifted quickly.

tom: gradualism seems to be gone. good morning to william dudley, sadness over shinzo abe. i pointed out a number of people that thought transitory was baloney. jonathan: he will be joining us on bloomberg tv in an hours time. tom: once again, he is too busy to talk to me. jonathan: you've got to be more polite to people, tom. tom: he is upset with me with the jets talk. jonathan: maybe the mets, too. how are the mets doing this year? tom: the only thing shining more brightly are the dreaded new york yankees. jonathan: how about the red sox? i have barely heard baseball talk from you this year. tom: it has been painful.

jonathan: payrolls 20 minutes away. this is bloomberg. ♪ ritika: former japanese prime minister abe has been shot and killed. i'll making a campaign speech. he was the country's longest-serving prime minister and highly influential. the suspect was arrested moments after the attack. nhk said he had served in japan's navy. abe was the best chance to revive japan's economic -- economy,

. the u.s. jobs report is expected to show employment slowed in june, an estimate of -- jobs to be added. interest rates this month -- minutes from now, at 8:30 a.m. new york time. boris johnson is still at 10 downing street after his plans to resign. his plans for an orderly retreat are threatened. the party once to speed up the contest to choose his successor by the end of the summer. the prime minister has -- a three month timetable yesterday. airlines delayed a crucial shareholder vote to extend a merger to frontier and jetblue. the vote has been set, to july 15. that could signal spirit does not have shareholder support on the agreement with frontier. global news 24 hours a day, on air and on "bloomberg quicktake." powered by more than 2,700 journalists and analysts in more

than 120 countries. i am ritika gupta. this is bloomberg. ♪

>> the labor market is generally tight. i am more of the persuasion if get the numbers that do not make sense, there is something wrong with the numbers. jonathan: the president and former bank of england policy committee member, a special thanks to everyone with us yesterday. great roundup of guests in

washington, d.c. take effort of the team to put that together. tom: it was successful in the hot, 95 degrees. jonathan: swampy. tom: we've got to make it a habit to get down there more often. jonathan: and record it. tom: i like it. overlooking the white house, overlooking a nation's politics into the end of 2022, particularly leading up into 2024. this jobs economy right -- this morning will heat up. we begin our coverage 11 minutes from now with a frequent guest, we are honored to bring you the former fed governor at boost school chicago, randall crosser. -- for a new inflation regime, where we do not get back to 2%. a kind of job economy do we have and stay at a 3% inflation run rate?

>> the job market is still quite hot, even if the numbers are not so strong today. -- is still under 4%, we have been generating an astonishing number of knobs. i think the job market probably will weaken, but, it is undoubtedly the case that there will weakening. it is still relatively strong. the issue is going to be, what are inflation expectations? are they entrenched? tom: a look into wages, as paul talked about a strong economy, are we any where near a wage spiral? randall: i don't think yet. people's expectations in the short run are high hyperinflation. he should be, inflation has been extraordinarily high. will that persist? will it be three years, over five years, even as the economy

starts to slow down and job market starts to slow down, the people say, hey. he reason i have a job is not just because i want a job, i want to provide the best possible for my family. no matter how hard i work, i do not get enough money. i have to get more money. that is the psychology they worry about, they are trying to move expeditiously to avoid that happening now. jonathan: what makes this fed pause? where does that come from? randall: i do not think they are pausing anytime soon. i think inflation expectations are at the upper end of the range, short-term executions have been much higher than they have been. i think they want to make sure they stomp out the possibility of inflation expectations moving up, and i think powell has made it clear and gradually dial things up, soft ending, soft-ish landing, not fighting inflation is our priority. i think they have made it pretty clear it is going to take a lot

for them to pause. kailey: when tom and jon were in d.c. is today, they spoke to steph. they said the key indicator they are not looking at is jobless claims. companies are going to stop hiring people. you are going to see a jolts in job openings at how close are we to the point where companies look around and say, we cannot retract workers and -- attract workers and pay them, those jobs are going away. randall: not clear whether or not yet that jobs are going way. we have seen the jobs number has been below expectations, but not because the job market is weak. it is because the firms cannot hire people, they are unwilling to push wages up enough to get them to come in the door. we will have to see how things play out. i do think the job market is going to be weakening. kailey: as we talk about a weakening job market, to what

extent will the fed tolerate that weakening? what you think the threshold is between the softness in the labor market that the fed once to achieve, and that which causes the fed to second-guess itself? randall: i think the key thing they are going to focus on, powell has said they pivoted to focusing on inflation. the key thing will be inflation and inflation expectations, they understand that the economy is going to be slowing. i think this is exactly why they need to be building so fast now. employment rate is still below 4%, political pressure isn't so strong on them to slow things down. they are not quite getting the blame for slowing economy, because as far as the job market is concerned, it has not slowed. that is why they have to move now, consequences will come later. jonathan: that economic data is seven minutes away. we will get randy's response as soon as that number drops. mike, what are you looking for from that number in about seven

minutes? michael: the headline number is expected to be 265. i think it will be an interesting question, the idea of whether or not companies can find workers or not. in the beige book and ism surveys, we have heard it is stuff to get workers, trained workers, for the jobs available. that will be one interesting thing to watch. i will be paying attention to the participation rates, supposed to take up to 262.4. the number of people that get hired in the household survey, that produces the unemployment report, is -- it does not matter whether it is a high-level or a low level, it matters the difference between them and the number of people in the labor force. even if we get fewer people hired, it is possible that the unemployment rate goes down from here. tom: do the acclaimed histories of blanche art and summers of permanently unapplied, they

cannot get back into the force, even the cost -- caution of jeff sachsen, there is a part of america that is not going to participate in the american labor economy. does this jobs report factor that end, or forget about the people lost? michael: what you have to look at as this jobs report comes in and future ones, we will look at the minority unemployment rates and see if they start going up. there are usually last hired and first fired, see if they are rising. we can look at the number of people working part-time for economic reasons, that is another sign that companies might be cutting back and the people that are host marginal, the ones put into the part-time work force. those are things to watch as the economy deals with higher interest rates, and definitely seems to be slowing down. jonathan: mike mckee breaking down that number in real time. five minutes time, we get reaction from randy and catch up with rosenberg of blackrock.

tk, bases-loaded. do you like that? that was just for you. tom: very good. jonathan: stepping up to the plate. getting the stadium packed. walk off, homerun. do you like that? tom: he has been watching field of dreams. they are coming out of a cornfield, jon. jonathan: are they going to do that again? tom: they do that every year. my nostalgia is to understand that this jobs report linked to inflation next week is critical. jonathan: futures unchanged. payrolls report, up next. this is bloomberg. ♪

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jonathan: we are a second away from the payrolls report. futures negative. yields on a 10 year, down at 268. your jobs number, that is the upside surprise. michael: this is going to feed

the inflation side of the debate. we have 372,000 jobs created in the month of june. offsetting that is a 74,000 downward revision to the prior two months. private payrolls come in at three 81, manufacturing payrolls are up 29,000. unemployment rate, unchanged, 3.6% another month in a row. average hourly earnings, hang on. 3/10, same as the last two months. this is going to give the fed some comfort, because the month over month is not accelerating. they would like to see it maybe go down another tick, but i'm not going to speak to where they think a good level is. it is coming down. that pushes the year-over-year level down to 5.1%. the number last month for the annualized rate of earnings was five point three, revised up from 5.2.

labor force participation, an interesting number. 62.2. that drops from 62.3 the month before. economists bought it would go up. fewer people looking for work, i will have to dive into the unemployment numbers here. it looks like fewer people looking for work, maybe that is why even though we had a big payroll number, we did not see a change in the unemployment rate. jonathan: two-year yield, we have liftoff. up to 3.1%, clearly an upside surprise driving this idea that the fed, that green light is brighter for them to go again 75 basis points at the end of this month. yields up, stocks down. down .3% on the s&p. down .8% on the nasdaq 100. we are on parity watch for euro-dollar, we had a break earlier of 101. 101.26 is where we are now.

the big number screaming at the fed, it is ok to go again. tom: it is a movable feast, we are going to do this for global wall street. individual yield statistics are important, but the spread widens out on the prejudice -- edge of pre-misery. we had a move to negative five point four on the two stints spread. the key technical point for me is eight basis points, negative second -- -7.8 percent, it is too much math. the answer is, we go in the inflation. do we go with 100 point -- basis point direction? jonathan: 75 is on the table now. give them what they expected. i'm not going to say they will not do 100 basis points, i thought they would do 50 last time. my prediction is worth nothing. i will talk about this move at the front end, up 11 basis points, pushing back on the idea

that the fed can sell back on interest rate hikes. for many, it will be the labor market that will scream and then stop. i have one question for the economists in this data, this is another month of robust payrolls data. on a headline. yet, unemployment is at 3.6%. i would not say wages are flying. an observation at the moment. tom: there is enough moving parts where you can find a statistic. let's go to mike mckee for a look. mike, you are looking at the data. believe matters to you? michael: we were talking about where you might see some issues. we were wondering what might happen to minority unemployment. it is mixed. lack or ethnic african-american appointment fell, no sign of people getting laid off or last

hired, first fired. hispanics did not change. a rise in asian unemployment, up .6%. that might be statistical noise. 3% still up, very low number. taking a look at the numbers that go into the unemployment rate. the labor force fell by 353,000, even though the participation rate was 62 point two. unemployment was down by 315, unemployment was down by 38. the household survey, emerging significantly from the establishment survey, in terms of number of jobs. the unemployment rate, because of the change in participation not moving. tom: john from coventry emails in and says, what does this mean for the secretary of labor, star walsh? michael: a victory lap for the biden administration. he can say we are producing

jobs, the unemployment rate is not change. tom: mike mckee with us, a john report. jonathan: rock solid. tom: we move to the former governor of the federal reserve at the blue school. randall kroszner. we had gradualism and a measured moment greenspan. is that history with this out economy -- auto economy? randall: that is history. you can see the fed is trying to move expeditiously. this is completely consistent with their desire to move fast, i think they are likely to go 75 basis points at the next meeting. obviously, we consider inflation data between now and then. they will get a gdp report. they know the numbers before we know them. they make their decision on wednesday, we find out on thursday. i think they are going to go 75. there is nothing in this report

that would slow down from that. jonathan: a question i have, we keep churning out robust jobs growth, payrolls, 372,000. unemployment has not stabilized at 3.6%, i want your thoughts on what you make of that. randall: you've got two different surveys, and different ways of gathering the data. they are not always exactly the same. we do not always no month-to-month why one is going one direction, one is going another direction. i think both of them point two pretty robust job market right now, but i do see that weakening by the fall. kailey: what do you make of the lower participation rate, 62.6%? randall: it has been bouncing around, i think it is small enough month-to-month movements to -- it is too difficult to make too much of that. i think what it says, there is a

large number of people who are not going to come back and the labor market. especially older workers that came in robustly before the pandemic struck, this is just too risky, there is no need for me to be in the job market, being exposed. i want to be spending time with my kids, traveling with my loved ones. i think we are not going to see the labor farce -- force participation rate move up to where it was pre-pandemic. jonathan: 372,000 on payrolls, yields on a two-year up nine basis points to 3.1% on a two year yield. the light stays green for the fed to go again, perhaps 75 basis points. looking forward to catching up with the panel. we talked to the white house secretary, coming up in 50 minutes or so on bloomberg tv and radio. tom: the smartest strategist i

have heard in recent days is strategist drone powell, works for a small firm in washington where he said, it is a strong economy. jeffrey rosenberg leads us forward, a blackrock co-lead portfolio manager of the systematic, multi-strategy fund. jeff, that is a mouthful. let's cut to the chase. how do you devolve this odd economy in a new volatility in living in the bond market, down to a systematic strategy? >> well, it is an odd economy, but it is a payroll report as jonathan nailed at the getting that solidify 75 basis points. going into this, the market is expecting a slowdown in payrolls. you heard randy talk about that in the fall. that is the case, but it is not slowing fast enough. the fed is going to have to do more.

when you see the lack of labor force participation -- i agree with randy, we do not want to over interpret here and there, but haven't really seen that. that is a real problem on the wage inflation front. the lack of payroll slowing and lack of an increase in participation is highlighting the pressures on the fed, that you have an overheating economy and they need to push on the demand side. you are seeing the reaction of the front end reflective of that. tom: i want to go to the wheelhouse of what you do, which is linking full faith and credit and trying not to lose money. pre-minister over at td securities talked about a serious inversion, perhaps a greater inversion that we saw within 2000. this is where the two year yield is substantially higher than the 10 year yield.

what does each basis point mean of larger inversion going forward? what does that mean in the real world of not trying to lose money in fixed income? jeffrey: the first part of that of what it means, you are seeing a bit of that movement in reaction to today's print. bigger increases in the short end, -- in the long end, the flattening of the curve, is the market expecting the fed to tighten into a recession. this is not a new expectation, but a reaction in today's data where they just said the labor markets are hot. the fed has to do more. if you look at what is priced in the market any forward basis, it has the one year fed funds rate to years out from now lower than where it is expected in one year. what is that saying? it is saying the market is expecting to push us into a recession. that is the same thing when you talk about a inverted yield

curve. interest rates are going to inflect fed policy. longer interest rays are to reflect that future expectation of recession. you heard powell admit that they are willing to take that risk, because the bigger risk is letting the inflation become entrenched. tom: it is so important, i will have the chart for monday. i look at curve inversion, we forget how rare are this is. i got to go back 30 years to get out to a half a percentage point inversion in the curve. that is how rare some of these strategists are talking about. kailey: we are talking 1980's the last time the curve was inverted by 50 basis points. she echoed the sentiment the fed is going to continue to be aggressive, even if we see that softening in the economy, therefore, we continue to see the short end go higher than

those logins. do you agree that could ultimately end up at half a percentage point inverted? with the fed tolerate that? jeffrey: it is about the broader question of, how will, as we get into the fall and you start to feed the -- feel the impact of the slowing economy, how will the fed balance its two objectives between inflation finding, which is front and center. what they are saying is the number one objective, kind of easy to do that when the labor markets are red hot. secretary walsh as you will have later on takes a victory lap. it is going to be harder for the fed and the market to talk about inflation as the only objective when we are looking at an environment where inflation, the year-over-year basis is coming down. unemployment is potentially going up, or at least, these payroll figures are going down. priya's call on the inversion is a statement that they are going to maintain into a slowing

economy this very aggressive stance on the fed tightening. they may or may not do that. i think it is an open question as we get into data, that it is more mixed in terms of the growth inflation trade-off. clearly, if they maintain this degree of inflation fighting spoken into an environment clearly slowing, yes, you can see that degree of inversion in the curve. kailey: the operative word being "if", the question if the fed is going to bling. it used to be a conversation of september, that has clearly shifted for people looking for 50 basis points in september. how long do you think it will take the data to deteriorate enough for the potential for the fed to think twice? jeffrey: i think we are looking at a slowdown in the jobs market into the fall. i thing september, october, november period is where we see that trade-off starting to show up. these reports become more

important. the fed meetings are going to get more interesting when you have that tension, and they are starting to think and talk about slowing the pace. a lot of that is going to depend on the pace of slowdown in the inflation site. there is an expectation that you get that slow down, that movement in two sides falling inflation, rising unemployment is going to make a very difficult period for the fed. it is not where they are today. later this month, it is going to be 75 basis points and a more clear path. i think as we get into the fall, the impact of the tightening and financial conditions shows up in the labor market, we are going to see this trade-off manifest in the fed's decision. tom: on radio and television, jeffrey rosenberg with us of blackrock after a buoyant jobs report. two-year reacts with a higher two year yield, on 11 basis points. 3.12% with substantial negative

4 basis point curve inversion. equities down on the chin. futures down. the vix comes up .36. you are living a total return index of a -12%. i am going to chart it out from 2020, is negative 6% ---6% analyzed in bonds? do you hide by going short duration? jeffrey: on the rates side, so much of that is the commendation of two extraordinary things. first, we came into this bond market with very low inflation at spec tatian. this transitory was priced into the bond market. when you have low coupon and have a recess in inflation expectation, that is the impact. bond markets do a bad job of facing unexpected inflation, that is what we got. the good news, if there is some

going forward, we priced a lot more inflation here into bonds. you have seen increases across the curve, and yields, and a lot of increases in the short end. short end ration makes a lot of sense. duration has been a tough environment. the yields are getting to a better place. we need to see the inflation forecast validated for that to manifest. there is still a risk there, but certainly, we have priced in a better inflation expectation trajectory if we start to realize these forecasts in inflation coming down. some of that yield increases going to be a little bit more protected on the front end of the curve. tom: what i am hearing is the mess of uncertainty going forward. kailey: and inflation report that could put the nine year on cpi wednesday, that could be something this bond market is watching carefully and talking

of the uncertainty, the amount of volatility we have seen in continue see. we have almost gotten used to the idea that we see double-digit basis point moves on yields, the two year yield right now doing the exact same thing today. up 11 basis points on the back of this data. it is remarkable, the extent to which we see the bond market moving, and the uncertainty out there. jeff, i am wondering when you think we will get a clear enough read that the bond market can make a decision either way. jeffrey: yeah. look at the consensus forecast. you can find them on bloomberg, ucsd. a product plug for you guys. the consensus forecast has inflation for a year-over-year basis going down. we need to see that. as you point out, the cpi reports are as important now than these payroll reports. arguably, more important is inflation as the central issue for the outlook for financial

markets. that is what we need to see, that is what the modern -- bond market needs to see. these monthly figures coming down in the forecast range, and seeing the broadening of inflation stories start to pull back. it has been a bad set where it has been the opposite, that is why we have gotten this change from the fed, jonathan pointed out expecting 50 and getting 75. that is because you have inflation show up on the surprise of the upside. we will be able to have a little more confidence that we are not getting these persistent inflation surprises when you see it in the cpi reports. tom: jeff rosenberg, with blackburn -- blackrock, thank you. let me give you the data again. good guests coming to close out the hour, we do it with activity as equity softer. yields move 12 basis points, h i norma's cfa talk -- ginormous

cfa talk. unemployment rate, three point 6%. the economist ferro said that was odd. nonfarm payrolls, 70 2000. a revision brings it down to 298,000, a very strong number. re--- we recalibrate now with rate strategist at bloomberg intelligence. ira, i want to go to you to challenge the fed has. something i hate to talk about, this balance sheet. and what the fed is going to do with the flows of stuff they have on the balance sheet. how does a buoyant labor economy change how jerome powell puts its cell orders for bills, notes and bonds? ira: the fed is not actually selling anything. they are just not reinvesting the maturity that came up. you saw that in a big way a week ago, because keep in mind, the treasury the charities are only

two days a month. the 15th and last day of the month. last thursday, you saw a significant reduction in the fed's balance sheet, that will continue as they ramp up in september. we will have a modest effect on the market, but mainly, you are going to see that in the auctions. when we have the three-year auction next year and the tens and 30's on tuesday and thursday, that is going to be where you can see the squishyness in the bond market. you had a few pretty weak auctions last week, people do not want to get in front of this market. katie encz into the volatility, this has been -- i do not want to see completely unprecedented, but we have seen -- kailey: it is more movement at the short end, more inverted curve. negative five basis points, priya says we are going -50 basis points.

ira: we got a call about -40 basis points or more than a few months now. i think the inversion of the yield curve is going to look more like a date in the 1990's then it did last two cycles, when you got to -10 basis points on the two-year curve. it would not surprise me, i was talking this morning, we have seen so much flattening of the yield curve that we have to be cognizant of, when does it end? it probably does not end quite yet. as both jeffrey and priya has said in the last half-hour, look. it is going to be time for the fed to continue to be hawkish, but that means we are going to have rate cuts at some point in the future. that is going to increase the amount of inversion across the treasury curve. kailey: what would be an appropriate expectation of the terminal right after this data, head of cpi next week? ira: we have been a 3.5% at

least, 4% is not impossible in terms of the terminal rate. if they go 75 basis points, you heard governor waller yesterday in his talk mentioned. frontloading of 75, 50 in september. they go another 200 basis points this year, you could get up toward 4%. particularly since it seems the glide path of inflation is going to be slower. i think then hoped. i think that means the fed will have to hike a little further then may be the baseline expectations of some people. that means you can get to your yields up another 40 basis points in a hurry. tom: thank you so much. welcome back jeffrey rosenberg and ira jersey, no one does that like bloomberg surveillance. vix out .37%.

that was my annual mistake. michael casper, bloomberg intelligence equity strategist, the only one in the building that can spell connectivity. tell me what is happening across gina martin adams world with earning revisions. how are you preparing, given a buoyant job economy for the mystery of guidance in earnings? michael: earnings revisions have started to come down. if you look at our chart book from last week, we have a net revision breadth chart, which shows the number of negative revisions versus positive revisions. that is starting to turn over, finally gone negative. tom: do you have a number in earnings growth? what is the statistic you have? michael: our consensus is close to 10%. it is a mystery where margins are going. margins are being revised,

operating margins revised down. the magnitude of the miss on operating margins is the big question, where the eps number is going to end up. kailey: how much of that margin pressure do you anticipate is going to come from the labor side, considering we saw percent on a year by year, but month by month, we were steady. michael: i think still quite a bit. i think that is mainly a problem for discretionary, tech, some of the more growthy stocks. the nonfarm payrolls number coming in way higher than expected kind of suggests the phillips curve is back, inflation is going to remain high, argent are going to remain under pressure. kailey: headlines out of rafael bostic, talking about how the jobs report is sing the economy is strong, saying they can move 75 basis points at the next meeting and not damage the economy. how much economic damage do we need to see before it does real damage to earnings growth, that by and large, given the far side

input cost pressures we have seen, have been able to hang in there? michael: there is going to need to be a quite a bit of damage to hit earnings growth. when you hit high inflation, you have high revenues. revenue growth is going to be strong. you've got to collapse that margin line. -- has been good about taking that hit in stride. you've got to collapse that margin line to get a hit on eps. tom: are you seeing companies adapt? i am a huge believer that, given the cards dealt, companies adapt. are you seeing within the microcosm of the zillion companies in america, are you seeing the beginnings of adapting? michael: the one that sticks out in my head is amazon. they put that 5% surcharge on for inflation a couple months ago, and that is an example of one of the biggest companies taking advantage of the inflation situation. tom: zeitgeist underestimate what you and bloomberg intelligence are seeing

everyday? michael: not necessarily. i do not think so. tom: kailey, michael has to help us. he is supposed to say no, bloomberg intelligence is all-knowing. kailey: they are all-knowing. we appreciate their insight. if we could take this down to the sector level, after data like this, after looking at the moves, i take a look at the banks. looking at spider etf, which is how i gauge the actions of the sector as a whole, before the opening bell rings, up a quarter of 1%. how do you balance the idea that the fed is going to be hiking rates, that is going higher, but you have an inverted your -- yield curve and fear of recession and put it into a thesis for the financial sector? michael: the financial sector trades closely with the two tens curve, which is inverting and possibly getting deeper inverted. that is a negative for financials performance. is not matter much for financials, that is going to be more about the 3, 5-year end and other curves.

certainly, performance is going to be pinched by the two tens inverting. tom: thank you so much. michael casper with us of bloomberg intelligence. let's wrap this up, if we can. 3.6% unemployment rate, canada with negative numbers. they get a record low unemployment rate, north of the border. that in itself is interesting, as well. on the jobs run, i am sorry. we are running at a 300,000 level. kailey: it is hot, may be hotter than the federal reserve would like, even if they want to stay -- say the labor market is strong and can tolerate the economy hiking rates. at some point, they are going to want it to cool down. you are not seeing it yet. as we think about that, what we are left with is a big move at the short end of the curve. the two-year curve is up 10 basis points, the inverted yield curve to the tune of five basis points. the long end hanging back a bit.

it is stunning, these moves in the bond market. i know i should be used to it by now, but every day is, wow. tom: as we heard someone say this morning, nulty decade gyrations -- multi-decade gyrations. the great missed call on weak dollar, it simply has not happen. we spent far too little time this week on e.m. economies, which has struggled to get a little bit of a breath of fresh air today. some brutal for e.m. against strong dollar. i want to point at the major dxy index that has less of e.m. than the bloomberg index, we are way out over two standard deviations in the strong dollar move. as we go in the inflation port -- report next race, dollar animate is critical. kailey: parity watch. euro-dollar, 101.44.

we had a break of 101 earlier today. what does that mean for steen lagarde -- christine lagarde? tom: stay with us on the many stories this friday, on radio and on television. good morning. ♪ jonathan: an upside surprise on payroll, yields climbing, equities lower. the countdown to the open starts now. ♪ >> everything you >> this is bloomberg's the open with jonathan ferro. jonathan: live from new york, we begin with the big issue.