mark: i'm mark crumpton with bloomberg's "first word news." in russia, unofficial reiterated that the country remains open to talks. according to the associated press, the ukrainian official says his battle loss is up to 13,000 troops. the eu has agreed to put a price cap on russian oil at $60 per barrel. the move is expected to pave the way for a wider deal.

the price is higher than where russia sells most of its crude. one of the main aims is to keep russian oil flowing to global markets but it is less generous than an earlier proposal after pressure from poland. in the united states, president biden has signed a bill that averts a freight will strike. it imposes a labor agreement. we spoke to the labor secretary. >> there are provisions in the contract, it was not a bad contract. a 25% increase, a split on health care. they were able to get work rules changes, three unpaid days off. the issue of sick time, the companies need to sit down to have a serious conversation about two issues. mark: president biden called the

deal a victory for workers. an investigation found a string of chinese manufacturers in violation of tariffs. they have been in violation by selling equipment exported from southeast asia before shipping it to the u.s.. the u.s. is working to boost domestic manufacturing. global news 24 hours a day on air and on bloomberg quicktake. powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. >> welcome to bloomberg rockets. katie: let's take a look at the

markets in the wake of the superhot jobs report. we are off of the worst levels of the session. the s&p is off by .6%. the big tech names are leading the losses. the bond market you have 10 year treasury yields above 350. off the most extreme levels of the session. at that altogether, it's not moving the vic's too much. you have the vic's below 20. jon: you mentioned the weakness we have seen in technology beyond the headline. outlook is still very important these days. some challenges for the marv l center business. doordash is not immune.

analysts are concerned about the growth story. boeing is moving higher. a potentially big order for planes coming from united airlines. northrop grumman is up. they have unveiled their new stealth bomber. then we have the job story in canada. as well as the story the markets are reacting to. the canadian economy adding 10,000 jobs in the month of november. that was quite a pullback from october. that is starting to raise questions about whether the bank of canada is going to start to raise rates at a slower pace. katie: we heard from the richmond fed president earlier today commenting on the labor market saying that bringing people back to the workforce won't be so easy. >> labor supply looks like it will remain constrained.

the fed's efforts will not be easy when americans have 1.3 trillion might more in savings than pre-pandemic. katie: for more insight, let's bring in mike mckee. i look at this report, it seems hot across the board. is anything that is not inflationary about this? mike: it's hard to do cause-and-effect with some of this because we have 10 million job openings. that's not that much in terms of trying to close the gap. it's a tough issue for the fed because the companies that are hiring will have to pay more for their workers. we are saying that reflected in the average hourly earnings numbers. it is particularly true in the service category. they are generally lower pay jobs, but also jobs the people

don't stay in and they don't want to come back immediately to. you see the growth in service industry paying higher than the growth in goods industry pay. that something the fed will have to keep an eye on. jon: one of the things we are hearing now, i mentioned the canadian jobs picture even though the bank of canada is still an hiking mode. we're getting to a more sensitive point. a lot of people with sizable household debt and there is a concern about how quickly the economy cools down. how quickly does a jobs report like this one factor into the fed thinking on how aggressive they can be on fighting inflation into next year? mike: it doesn't change their views for the december 14 meeting. they are locked into 50 basis points which is historically a huge move. they are still raising rates aggressively and they will get to around 5% by early next year

if not in december. then we will see. does this report continue? do wages continue to grow? that's jay powell's main concern that jobs keep pushing up wages and companies raise prices to cover those and we will see a spiral going. we have to see if that continues into the new year as rates get higher. jon: thank you as always. for more insight on what this employment picture means for the broader market, let's bring in our next guest. let's follow the comment from mike mckee. in terms of upward wage pressure, how much more do you anticipate? is that a continuing concern through next year? >> absolutely if there was a

main takeaway from the payroll report it's that the labor market is still tight and that means wage pressures will continue to persist. directionally, i think they will probably go toward the lower end of things, but it's probably going to be a lot slower of the downward slope then people were expecting. that keeps the pressure on the fed. outside of the high strong inflation number, the thing that is missed by everybody is that the underlying internals of the payroll report were very weak. you have a dynamic that puts the fed into a pickle where growth is slowing faster than it has been and the wage growth continues to be strong. that's a tough situation for the fed. katie: i heard this a few different ways today which is how can we be it -- headed to a

recession when we have these consistently strong prints coming out around the labor market? if you look under the hood, growth is slowing may be quicker than expected. do you see a recession next year? >> on your first point, the labor market is the strongest part of the economy. you have seen all of the stats that show the ratio of people looking for a job versus jobs available. that ratio is still very elevated. that dynamic tells you the labor market is going to stay tight for a while, but directionally it is slowing. the pace of slowing is probably picking up. do i think we will be in a recession next year? probably. for me, that's a secondary question. i think the most important thing as a market investor is are we going to see a profits recession ? that's the more important

question in the answer to that is yes. that's going to have negative implication for the market especially when you parrot with the tightening liquidity environment that's not going away. katie: how do you structure up portfolio around that? when you chart ig spreads against the s&p 500, it's a mirror image. with that in mind, the question have been trying to answer is why would you bother with equities at all if bonds are doing the exact same thing? i hope you have an answer. >> the markets are a lot cheaper than they were before on the equity and fixed income side. the thing you want to avoid is in the midst of a bear market to capitulate and give up on stocks. it has been the biggest detriment to people's long-term

returns. i agree that the risk reward for bonds over the next 12 months is probably in favor of bonds and that's why we are overweight fixed income. fixed income and duration gives you the opportunity to play offense where probably the main playbook in the portfolio should be defense. if you look at the types of equities you want to own, high-quality defensive stocks could do well in this environment even if we are faced with the growth slowdown. take your point, but a lot of the bad news, these companies could put up positive returns in this environment. jon: a final point of context because you mentioned getting out of the market and the potential, there are at least 10 wall street shops that see the s&p 500 i next year lower than where it is today.

and picking some of those defensive areas as outperformer's, do you see the stock market underperforming or being lower than today the end of next year? >> the best part of not being on the side is not being tied to these forecasts. where the markets going to trade december 31 of next year? the way we have to look at it is risk reward. the risk reward here for the stock market particularly the bubble assets and cyclical assets is not good. that means there's probably more downside to be seen but in the wake of the downside, you could get some nice opportunities that you want to take advantage of. katie: it's great to talk to you, have a great weekend. coming up, more insight on the november jobs report from a senior u.s. economist at deutsche bank. this is bloomberg. ♪

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katie: this is bloomberg markets. the u.s. added more jobs than estimated in november with hourly wages rising the most in nearly a year. let's get more perspective on what this signals to the fed. we heard from jay powell on wednesday. he seemed pretty clear that we are going to get a 50 basis point hike this month. after the data we saw this morning, can the fed afford to slow down? >> yes. the bottom one with this report

is it doesn't change anything from the fed's perspective. chairman powell's message still holds. they're going to a higher terminal rate than what they had expected in september. this report comes with a bit more hair on it than usual for several reasons. number one, the survey response rate was 49%. normally you get 65%-70% response rate. does that mean we will see larger than normal revisions in the second release? number two, again an average hourly earnings was 6%. that's partly due to two categories, transportation and warehousing and information services. transportation and warehousing, that was a five standard deviation gain on a monthly basis which begs the question, it also came with hours worked down.

was there something going on there it also showed that employment was down in that category. inflation was another story that perhaps some of those layoffs even though they showed again, what happens for the bls, they suffered severance payments in the calculation. if the severance payments are paid out over multiple months. one-time payout, no. multiple months, yes. bottom line, take out those two categories, let's assume normal in those categories, average earnings would have been .3%. add it all up, it's all about the income growth number. still growth that is stronger por to covid and as the survey showed earlier this week, it's still a tight labor market. jon: jon: jon: jon: jon: jon:

jon: helpful analysis there. for the markets that look at this today, let's hope there aren't too many changes and a fight against longer-term inflation is the new reality. what are your expert patients -- expectations on the point where it's going to start coming down? >> we expect the fed to get a 5.1% by may of next year. that assumes a downshift of 50 in december than 25 hikes after that. we also expect recession to start to take hold the second half of next year. the fed finally cutting rates by the end of next year by about 50 basis points. we are still some ways away from that and from the fed perspective, the starting point of inflation is so high, they

can't immediately start to cut rates as soon as you see a negative payroll print or the rates start to rise. the need to hold back into stay firm and keep policy restrictive in order to not repeat the mistakes from the 1970's. katie: let's talk about what restrictive means. you bring up the concept of the terminal rate. are we in restrictive territory right now and where is terminal? are we above a 5%? >> from jay powell's perspective, he is saying he would like to have the nominal rate higher than the inflation forecast all the way out the curve. for most of the curve, it is. for the front end, not yet. what jay powell is saying is the terminal rate for us is higher than what we said in september

which was 4.6%. let's take him at his word and a that's one more hike. that's setting a floor for where he wants the market to be pricing their peak rate. he is not capping the top side either. that's why we think 5.1% is where they will settle ultimately come next year. at that point, hopefully your core pc inflation number year-over-year will be below somewhere around 4%. therefore about 100 basis points between the fed rate and where the inflation rate is. for most fed officials, they would like to see about 100 basis points buffer between the inflation rate and based on the inflation forecast and where fed funds rate is. a little more than that if you

add in the real neutral rate of 50 basis points. let's call it overall all in 150 basis points. jon: a good breakdown of the math. good to have you with us. time for a quick break, but coming up major banks warning employees stockings might be lighter this holiday season. possible cuts to bonuses next. this is bloomberg. ♪ 100% carbon free... is it possible? ♪♪ aes has been leading energy transitions for decades... and is partnering with the worlds leading companies to decarbonize industries... cities, and nations. even the internet. is it possible? can we reliably power the things we love and green the planet at the same time? yes... aes.

jon: this is bloomberg markets. 30%, that reflects what jp morgan bank of america and citibank might cut in their bonus pools for investment bankers according to a bloomberg report out today. it comes as investment banking

revenue across the five biggest banks plummeted 47% in the first nine months of the year. this is going to be getting a lot of attention as we head toward the holiday bonus season. katie: if your rates and commodities trader, that means you helped propel revenue to $54 billion. going off how these bonuses are usually structured, if you're one of those traders you are probably going to be ok. it's not all bad news. jon: i think the challenge as well, goldman sachs a big year for some of their trading team it could be upwards of $20 billion of revenue. because you have cost pressures right now that the parent company is dealing with and appeasing investors, could that ultimately mean that despite

having higher trading revenue, their bonus pool ends up in lower? katie: how does the story make you feel? every time i hear about anchors bonuses going down, those bonuses are in the millions of dollars. if you take 30% off of that still a good. jon: this is a challenging time for a lot of companies in terms of making their case to the investing based. we have spent the last few weeks talking about the realities within the technology sector where people do well in terms of payment but might be looking for a new job. in terms of the market flows, you look at what financials are doing today and what they have done for the year as well, there's another stakeholder group and those of the investors that own these different banks. they are looking for cost-cutting measures as well. katie: if you look at what is winning, it's energy once again this year. that was the case last year

also. maybe that's the case for 2023. jon: we will be watching very closely. where also watching the markets under pressure today. the s&p could pull out a winning week but the softness is continuing. this is bloomberg. ♪ millions have made the switch from the big three

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mark: i'm mark crumpton with bloomberg's "first word news." plan has been discussed for weeks to expand training of ukraine's military forces. it could lead thousands of troops to be trained by u.s. forces at a base in germany. alex jones has filed for personal bankruptcy after being ordered to pay more than $1 billion to families of sandy hook massacre victims. he has been under legal press