>> i would not read too much into what the central banks are saying right now. >> some doubts or creeping in. this is different from where the fed's now. >> the fed is saying we have

gotten this so wrong for so long. we have to see the numbers. >> we don't really know where >> neutral rates are. there is a potential there will be more focus on rate hikes from here on out. tom: good morning everyone, jonathan ferro, lisa abramowicz and tom keene. this is a job stay which is about three days of fed press conference, and then onto some real data today. it will be interesting to see what jerome powell has to say. what is the end zone?

good news, bad news. chairman powell is on a mission to convince us that the terminal rate is going higher. tom: we are doing the job stay and we will do michael mckee but we will full markets. are the vigilantes out yet today? china, copper, they are out today. jonathan: the rumor mill is in overdrive. brent all week, 98 on brent, we are at 4% on crew today. imagine what this commodity market looks like if china came back online? let's see if we get any kind of confirmation on china because so far, we haven't had much. tom: ed seymour and saying we will not go to 120, lots of

demand dynamics. and then china, pacific rim is up if they get the demand back. lisa: if that happens, what is that due to our global economy? it's not just two-year yields. if you look at germany, to your yields are at the highest they have been. this comes after ecb's christine lagarde said they might have to have higher rates even still echoing what jay powell said because of this concern about inflation. jonathan: at the end of august you heard from an ecb as executive, and they were both saying the same thing, they are willing to cause pain. the ecb faces the near reality of rolling into recession and they are telling us that they will continue to raise hikes during that recession.

the number one question for 2023, if you expect economic weakness, do you expect the fed to stand idly by and watch a play out? that will be difficult. tom: we have to look at the present news and that is tech austerity. i want to talk about the scary layoffs and twitter and all that. is that separate and discrete from the job economy or does that pretend a path to 5% unemployment? jonathan: twitter is its own beast. you can talk about chipmakers, intel, cutting jobs and spending. you see that at amazon, list, we know that where the excess has been in the tech sector in the past couple of years, the last decade plus. you are asking the right question, is this a narrow story

or does become a broader problem? tom: 4.75% two year yield. jonathan: 40 basis points 12 months ago. tom: you could get into your cd. do you see the data check? jonathan: i'm trying to do that right now. futures look like this on the s&p, 25 minutes away from the payrolls report, futures are up .47%. the previous number 200 63. unemployment expected to take higher from 3.5% to 3.6. tom: we go to the markets, nadia lovell joins us. at ubs, you -- can you confirm a

call for next year? nadia: we have seen that this market will be choppy year in lower for longer because it will be determined by how high the fed goes and how long it stays there. do we end up in a recession or not? as we have been discussing, the fixed income market points to a high probability of recession. you have been talking about the inverted curve and watching that three-month tenure curve that tends to be a better indication of a recession. it is difficult to see how this market bottoms before that if we end up in a recession. market tends to pan in a recession not before a recession. chairman powell said it is quite

narrow, we have lowered our outlook for the s&p for june of 2023. there is a risk to the downside. we see an earnings recession. it is difficult to be bullish in this market when you have a fed that is laser focused to lower inflation. lisa: we have been talking about the real rate, two-year yields out 4.75%. when you look on a relative basis, it is looking more and more attractive. i wellpoint have a fully priced in that reality versus having to look at that real rate that tom talks about a striving for weakness ahead? nadia: there is further weakness ahead, the equity risk premium has come in because of that. we do seymour headwinds ahead from a rate standpoint.

right now you just have the historical averages. that will put more downward pressure on multiples. we think that will keep it cap on the market. most of it is behind us but there is more to come. jonathan: what part of the market do you think is ahead in the adjustment process and where would you lean into nadia:? parts of housing is further along. we have the mortgage rate and larger application to other sectors. we still think there is more to come in consumer discretionary. those markets that we look at is the energy market. the upward pressure of oil markets, we think that brent could cut -- get to 110.

jonathan: if china comes back online and we have had the discussion for week, if they reopen, if they give us a hint that this is where it is going. is that good or bad news for the u.s. market given the fed will have to lean harder into that? nadia: it is good news for energy, not good news for the broader market because we know that energy has been a source of inflation and that filters through the entire economy. that will make the fed stop tougher. right now, we think that the terminal rates back at five point 25%. it could push higher. if the commodity market rallies because of china coming online. you could get to a terminal rate if inflation does not debate -- abate. lisa: what is your biggest take away so far? nadia: earnings season has been

disappointing. what has continued to be clear to us is that a slowdown is happening particularly intact. we have known for some time there has been a slow down and pcs as smartphones. that is expanded to data sectors and gaming. we see a slowdown in cloud as well. i think in terms of the consumer, they remain resilient but it is become clearer that the consumer is shifting away from goodson into services. the dollar remains the key headwind here. we have heard that from multinational companies and we continue to watch as the fed remains the as the fed remains the most hawkish central break globally. terminal rates could come down while ours remains. jonathan: we saw that in the space of 24 hours, jay powell

leaning into the idea that we could have a higher terminal rate and then you had governor bailey trying to push back against that idea. it is bizarre. tom: i divert to our good guess, it is almost a three day jobs report. it's about the continuum since powell is stunned at the end of that press conference. jonathan: and then assigned to next week with cpi. tom: cpi, could it be a bombshell? lisa: i would say it's a 12 month stop report, two-year jobs report. we continue to get it wrong and surprised by. jonathan: they said to me that it was in a continuation of the jackson hole speech, they said it was a continuation of the march meeting that has been going on for eight months. do you know how painful it feels to be that bullish on the market

and see the fed heated up. lisa: what was the two year yield four months ago, 40 basis points. jonathan: 9150 on wti, futures positive .7% and yields higher for 75 on a two year. payrolls, that straight ahead. lisa: keeping you up-to-date with news from around the world. the u.s. jobs report is expected in a few minutes. a bloomberg surveys say that employers added 195,000 and it sees the jobless rate rising slightly. slower growth in employment and wages with the expectation that the fed can downshift to a 50

basis point next month. donald trump to a signal that he plans to run again in 2024. at a rally in iowa the former president said he will very, very, very probably make a run for the white house. workers are suing twitter over elon musk's plan to eliminate 3700 employees. their lawsuit claims the layoffs are taking place without enough notice. the job because will amount to half of twitters workforce. airbus has agreed to buy 140 jets. the list price is $17 billion. discounts are offered for big orders. the announcement was made while german chancellor olaf scholz was on a visit to beijing.

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>> there's a lot more momentum in the u.s. economy. europe and the u.k. are dealing with a much bigger rise in prices. we don't think the unemployment rate will rise soon. jonathan: i think he hinted at modeling what -- tom: i think that was just a shadow behind him. jonathan: payroll is about 12 minutes away.

equities up, yields higher, 4.15 on 10. just to see the two year, at 475 and now pushing for 76 or something. we haven't seen these numbers since 2007. tom: right now, when he was at brown university he would listen to folk acts. in joining us now randall s. kroszner former fed governor. there is the chairman of the fed siding arthur okin, and i will dragon the wonderful john taylor of stanford university as well. in this job economy that you confront, this theory matter anymore? or are we making it up as we go

along? dr. kroszner this is a bit unusual. we haven't seen the fed raised rates so rapidly before. we haven't had the coronavirus economy or inflation like this in 40 years. theory still helps but the data may be a little different than 40 years ago. tom: let's go to your wheelhouse and newtonian calculus. if the second derivative we are witnessing right now, what do they signal to you? dr. kroszner: what the fed is looking for is waiting to see where the labor market will crack. so far it has been very strong, continue to create a lot of jobs. continue to have a low employment rate.

what the fed will be looking for is some impact of its policies on the labor market. we have seen it in the housing market. the market has gotten that the fed will be raising rates into the fives, that is why the two year is up for 75. that is where the job market now in the one next month will be so important. lisa: the market has finally gotten it, they have received the message that the fed is putting out there. is the message that rates will be above 5% for the bulk of next year? is that the correct message that is being priced into the markets? dr. kroszner: how far, whether they go above 5% or how high above depends on labor market numbers. the inflation reports, but i

think we are likely to get 50 basis points at the next meeting and then a continued rise through the first quarter of next year that gets to a five handle. as i've been telling you, i think they will hold with a five handle for much of next year. lisa: how do we see this in the labor market? we are not expecting it to see that in the headline market. can you talk about where you see the layoffs happening? will it be tech centric or do you think it will be a broader swath of layoffs that will start feeling by the next quarter of next year? dr. kroszner: i think it will be broader. they are projecting unemployment up 4.4%. that feels too sanguine for me. if they want to bring it down, it will be hard to have the unemployment rate to go up to 4.4%.

j powell has talked about a higher unemployment rate getting into the fives and even sixes relative to previously slowdowns and recessions, that is pretty good but it is much higher. jonathan: he will stick around and break down the numbers with us when they drop. we are about seven minutes away from the fed's decision in the number we are looking for is 193. the meeting is 193, we are down from 263. mike mckee, sitting down pretty late for this job's number, what are you anticipating? mike: the whisper number is 238. i think we are looking for an upside surprise. if we get a loan number, if we

get a high number the fed has to do more work and we have to reprice again. tom: you are so good at the math in the data on this. who comes up with the whisper number? mike: there is the social media one that goes around the bloomberg has an actual whisper number. whi esco. if you have a number you want to put in you can do this. lisa: i know that you have been listening to this, if we get a higher-than-expected number decide to change where you see the fed going in terms of what they have to do to undermine the momentum? dr. kroszner: they will keep going until they see a slowdown in the labor market. if we get a strong number this month, a strong number of months

from now, inflation is still not coming down, they might even move 75 rather than 50 and they will keep going until they start seeing some signs of the slowdown in the labor market. tom: a look at the jobs report, when do they fold into this data? what is the lag for any given company's press splash to get into the mike mckee data? mike: a lot of companies are letting people go but they do it through attrition. they are also looking at not hiring, cutting back on their hiring plans as opposed to laying people off. if elon musk will fire 50% of its workers that will show up in the jobless claim numbers in the total number of tech workers will show up in another month. jonathan: michael mckee will break down those numbers with us when we get the report.

we can all see it looking around, layoffs year, hiring reasons there. inflation is rolling over in certain places. i've not seen it in the official statistics. tom: the importance of this number and four minutes. even now, they are restrictive as inflation comes down. jonathan: futures of .6%. yields up higher less than one basis point. two year 475. ♪

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jonathan: payroll is second away and the united states. the future is going into that number are up .5%. 10 year 4.14. mike: 260 1000 jobs created, that is much higher than the 193 that was anticipated.

we get to 33 in terms of private sector payrolls. the fed will be more concerned with what private companies are doing rather than government hiring. revisions, 29,000 positive from the prior months. you had that together and you have 290,000 jobs we didn't know existed before october. unemployment takes up to 3.7 from 3.5. 3.7, progress in the right direction in terms of unemployment as far as the fed is concerned. hourly earnings, the .4 rise in october, but 4.7 is bang on. let's also arise in the -- move in the right direction.

how are people taking this? jonathan: we seem to be training on the upside surprise but we can build that out. the first move is not always the right move so we will let this read. equity futures are unchanged. they were positive. the two-year is up seven basis points just short of 480. guess what a stronger, the u.s. dollar. down from the days high of 98 point 11. there's an upside on payrolls and that seems to be driving things. at least for now, good news is, what is it tom? tom: you are busting my chops

but i am looking at market adjusting, the vigilantes are readjusting to a fully employed america. it gets a lot of people upset. those are the numbers i am seeming -- seeing. jonathan: that 3.7 percent unemployment rate, will we see a different conversation? mike: they want to see the labor market slow down. the underemployment rate kicks up as well. that's six point 8% from six point 7%. the breakdown from an ethnic basis. the theme before the pandemic, 5.9%, thus up for 5.8%.

hispanic 4.2 from 4.8. white is 3.8 up from 3.1. every ethnic group saw an increase in the unemployment which is what the fed expected. lisa: the other thing people pauses the month over month increase in wages which came in hotter than expected at zero point 4%. people are getting jobs at higher wages. yes, there is a group of people that are completely out of the workforce but those that are in are getting compensated more. mike: they are getting compensated more but it is not keeping up with the rate of inflation. what the fed is afraid of hearing is whether or not people demand to keep up with inflation. inflation has to come down or wages have to come up. or rather -- as we fill in

those holes for unemployment, that year-over-year number is coming down. it is coming down slowly, the one thing i have noticed as i go through this report is that even with gains of 261 thousand, they are pretty widespread. the categories themselves, have slowed down. leisure and hospitality, we're getting 35,000 a month. you are starting to see some contraction there. manufacturing 32,000, thus hanging in there. construction, only 1000. i would've thought that would have up because of hurricane ian. i see no note about hurricane and in this employment report.

it took place after september but before the october 1 so it did not have enough of an impact . no discernible effect, that's what tom: i was anticipating. so here's the data. john and i are looking at the 4.77 and the two year yield. randy, you are a student of economic history. let's say we get a terminal rate of five point x percent. are really reverting to a financial structure that we know or are we in new territory? dr. kroszner: i don't think we

will go back to inflation at double-digit levels. i don't think the fed will need to go that high but as you can see with the two-year moving up in the market saying, this is a strong employment report. so the fed will continue on its path in the terminal rate will be higher than we thought. tom: what do corporations do, how do they adapt as we see the nominal yield in real yield,? dr. kroszner: one of the things in the fed's toolboxes to make financial conditions tighter, make it less attractive for firms to hire in less attractive to invest. real and nominal rates would be going out. that is their main tool for trying to slow the economy down and try to take some of the excitement out of demand and so

supply and demand can come together without as much price presser -- pressure. jonathan: the s&p is of 1.8%. yields higher by four basis points or so. i don't think this is a game changer for anyone out there. by the time we get to cpi next week we won't even be talking about what is happened in the labor market. we are still waiting to see real cracks in the market to see the job mandate. i will have this conversation with jeffrey a rosenberg blackrock financial management ofblackrock financial management and we will talk to marty walsh of the labor department. tom: futures up 30, the vix comes in 24.9.

lisa: the fed funds rate is now pricing in a peak of 5.25" percent in june of next year. that is feigning a little bit. i am looking at some of the details here. the unemployment rate getting close attention but the wage picture is confusing. what can you glean from the composition of jobs that are getting added or cut and how that might affect the wage dynamic more? dr. kroszner: one of the issues you have to be careful about is called composition effect. what areas are seeing job increases more than others? are they highways or low-wage? i have not had a chance to dig into the details of the report but that's what you have to look out. the fed will be heartened that

we are not seeing a significant acceleration in wage growth it still around 4.7% where it had been. it is hoping that will not rise in hoping it may come down a bit as they bring inflation down. tom: i am watching mike look at the real report which is 30 pages wrong -- long. what matters to you? mike: unemployment is interesting it went up and that's largely because of what we would've said his bad nose but -- bad news, the number of people employed false by 328,000, but those unemployed rises to 136,000.

it does tell you why the unemployment rate went up. we also had 22,000 people leave the labor force after 57,000 left the labor force the month prior. it is interesting, may be because kids of gone back to school and mothers have decided to stay home. we are not seeing people drawn back in because there are jobs available. lisa: that's where i wanted to finish up here and get your impression of why the participation rate is going down? despite the wage gains in the job openings that we see in the survey? randall: this is one of the great frustrations the fed has, why are we not seeing people come back into the labor market? i think it is a variety of factors. the older workers are saying, i

know a lot of people who did not make it through corona. i want to make sure i have time with my kids and grandkids. you are seeing lower partition rates by older workers. in younger workers are saying if i can not work from home, it's not worth going in. it is not enough to draw people in. part of that is because even though wages have been growing nominally, the real wages, inflation-adjusted wages have not been growing strongly. tom: dr. prof randall s. kroszner thank you for joining us. part of the coverage you will see you tuesday and wednesday, we will be at the nation's capital for the election. after the election, and this is from the team at axios,

president trump and his team on november 14 will start a 2024 presidential run. lisa: not exactly shocking. it is unlikely he will not run again. we are right into the presidential campaign. tom: how will it change before we get to a supposed announcement from the former president? we will go to jeff rosenberg who is wonderful on friday giving us a dynamic press conference. a job report of a fully employed america. from where you and your team said, is this jobs report old news, president news are indicative of a boy at future? jeffrey: it validates what we

think we know about the labor market and that is it is very slow to show some effects of an economic slowdown of the fence tightening. go back to our conversation on the post fed day, it's all about the long and variable lags. we are seeing just the glimmers of what the fed hopes to see in terms of the impact of their tightening this year. it will take some time and going back to what lisa ended with randy allen, the point here and powell mentioned it in the press conference is a lack of labor force participation responding to this job openings. the economy is not responding to the fed's tightening.

they have a lot more work to do. they will slow the pace but we are really not seeing the economic slowdown that is necessary for the fed to get to that inflation slowdown. tom: since you walked up to your tv set out blackrock, the two year yield gave us 4.76% how does a grizzled pro like you adapt to nominal yield moving so fast and furious? jeffrey: you take what the market gives you and in this market it has been a dramatic increase in restoration of yield for safe assets. you think back to the 0% interest rate environment and negative policy environment. now there is an alternative. it is adjusting to where the

opportunities are. the opportunities are in the front end of the yield curve where we are pricing in 5, 5 .25% peak fed funds rate. whether or not that turns out to be the peak depends on inflation. the fed signal to expect an increase in that terminal rate. it is not a huge surprise when we get to the s&p, there may be more of a surprise on inflation next week but there is a lot of opportunity there because we have done a tremendous amount of work pricing in the normalization, the tightening, and the movement to restrictive policy. lisa: do you think the balance of likely outcomes is that we will see higher than a 5.25" fund rate it rather than what we end up at the peak? jeffrey: it's dependent on the

inflation call. what we know about the inflation call? everybody has gotten it wrong. every time we get a surprise to the upside, the cpi? what happens to peak expectation we continually move it out. it is very hard to see whether or not that is the peak. if the inflation forecasts shows up and we get that .3 and course cpi, i think 5, 5 .250-bed be the peak. there is a possibility here, the lack of an expanding labor force, strong wages, there is this risk that we are already in a wage price spiral if that's the case, the fed will have to do much more than that 5, 5 .25. lisa: what is that due to risk assets? jeffrey: it's a challenging

environment for risk assets. we saw that in the market reaction to the press conference. they do not want to see financial conditions easing prematurely. remember the transmission mechanism is tight and financial conditions than it affects the real economy, slows the economy and then the slowdown in the economy slowdowns inflation. if the equity market gets ahead of that in easing conditions before it has time to slow down inflation, the fed has to raise even more that's why he pushed back against the market is up, what you think about that? and then he gave you the greatest hawkish hits to push down on the market. tom: this report gives chairman powell room to wait.

he can now comfortably wait for these inflationary reports we have seen before the december meeting. do you agree that it not gives a decrease of freedom but that it gives him the room to analyze price change? jeffrey: i would agree that this report is not changing anything that we already have in the expectations for the fed to begin a step down in the pace of the increases but not necessarily ending that pace of increase until they start to see the development and inflation of a slow down so they can slow the pace because they want to incorporate the brainerd perspective. that is about the fed acknowledging, we don't want to go 75 forever. we don't want to overdo it. we want to give time for the data to show up. today's report is in line with

that market expectation. lisa: are we going to get back to an era where we ride through this post-pandemic reality, inflation gets back to 2% and then we struggle with disinflationary forces or is this a different decade coming out? jeffrey: the premises do we get back to the pre-covid stagflation environment? there is that expectation built into market consensus. we would be highly skeptical of that outcome. there are significant structural changes. tom: we are frozen there on jeffrey rosenberg. thank you for that, it is a frozen moment with jeffrey

rosenberg. it happens, you have that. and thankfully we have michael mckee to save us before we get to ira jersey. will you freeze on us? mike: well i'm here in person. just to go with the news lately, joe biden wants oil companies to produce more, they say they can't find people to work. we are also getting into the holiday season, i was just in the store and i wanted to buy a thanksgiving card but they were all christmas cards. the retail trade only added 7000 total and department stores and general merchandise stores lost jobs during the month. warehousing lost jobs during the

month. what i'm wondering is if this is a seasonal problem in that when we have the pandemic, we all bought online. that pushed up the numbers of people doing retail and warehousing numbers. now, the seasonal adjustment factors are off. we have gone back to the pre-pandemic environment this may not be an accurate representation for where we are. tom: 10 year yield 4.1%. two year 4.7. ben evans just published it is clear we will see 5% yields. ira jersey joins us and looks at

the short-term. ira jersey, how do our listeners and viewers world change with the 5% 10 year and the certitude of 5% two-year? ira: i think we get the 5% two-year before the 5% 10 year. we will see some yield curve flattening because as we get higher and higher in terms of short-term rates and expectations that the fed will hike, now about 5% in the we. this data just comes in hotter than every forecaster is considering. as the fed pushes against the rising inflation, we will have the long and lied to the front end of the curve. you see that this morning but not as much as we will get if we see a hot cpi report.

lisa: we have been talking about the inversion and the two-10 spread. what kind of depth of recession does it pretend -- portend? ira: if the fed is going to go higher about 5%, that inversion just gets larger and larger. if the fed goes above the 5.25" and goes 5.5, you will end up with a negative 75 or a -100 and the two 10 curve. it's not unprecedented. we saw a deeper inversion in the 1980's. a higher short-term rates, the deeper the inversion gets. it doesn't mean that we won't see a 5% 10 year yield boat if the federal reserve hikes to 6%,

thus the ratio. tom: there are so many watching and listening have never experienced -75 basis points. what does that do to the banking system? is the glory days for moynahan and diamond in the banking industry? ira: when they used to do a lot more borrowing short-term and lending long term. some of the regulations have shifted the way banks do their business and they issue a lot more debt. it's less important than it used to be. it still matters because there are things like deposits. if you look at bank deposits as their total funding, banks

aren't just increasing the amount that they pay, the interest that they pay on deposits as fast as the federal reserve is increasing interest rates. it is taking advantage of that maturity transformation. tom: tottenham versus liverpool this sunday, what is it look like? ira: liverpool has not look good in the past few weeks. i'm giving it to tottenham. we need to switch to the equity market, the bond market is up front. lisa: that is a question of whether the equity market is getting with the bond market is getting in whether the messages are missing each other in transit. is this labor report good for stocks? gina: i think it is a net neutral for stocks.

it confirms what we already know that the labor market is still relatively tight, wages are fast, may be the equity market is taking solace in the idea that unemployment is starting to take out. i think it is a net neutral report. think about where we were earlier on in this week. there has been a lot of volatility in the interim. tom: we don't have much time, i want to ask you with immense respect for the hundreds of people that you work within the equity space. where are the income statements coming out of q3 into this historic time, where in the income statement is your team studying the most? gina: the most important point to watch is the operating margin . operating margins trough before

the earnings trough, they give you a clue to when you are at your worst point in time. this is important related to the labor market because many s&p 500 companies are producing negative operating margins, they are seeing them fall. several s&p companies have announced layoffs job freezes. the index will always be in front of what you get in the economic news and we are starting to see companies react to operating margin weakness through job codes or at least freezes to the labor force. you will see operating margins as stock. there is a lot of volatility out there in the interrupt. tom: we have to leave it there appeared we will look at that analysis across bloomberg

intelligence in the coming days and weeks. i have never seen three days like this. there has been some joy along the way. some things in the 90's, etc., these three days cumulative to the press conference, what we have witnessed today it is the most unusual time. lisa: the idea of a 40 basis point to year yield, highlights the regime shift in the unique moment we are in. everything has to reset at a new level in the question is, what does that look like and when do we understand what the contours of the new reality? tom: and then to washington next week. lisa: we do here for marty walsh, the labor secretary, how do they talk about a labor market that is still very strong

when everyone talks about inflation being the foremost problem. from new york, this is bloomberg. ♪ quarks live from new york city, good morning. equity is positive by little more than 1% get the count onto the opens is right now. >> everything you need to get set for the start of u.s. trading. this is bloomberg, the open. with jonathan ferro. >> live from new york, this is the big issue. it job day in america. jobs on the employment report. >> this is a strong implement report. >> a