>> the stars are realigning with interest rates, the banks, the debt ceiling. >> the fed is dealing now with a domestic inflation problem >>. this is global. >>a potential downturn in the economy relative to the strength >> everyone was looking for. >>this is another expression of financial democrats appearing in response to the fastest rate hike cycle since the 1980's. >> are the central bank inflation targets to high? i think the answer is possibly yes. >> this is "bloomberg surveillance" with tom keene, jonathan ferro and lisa abramowicz. jonathan: for our audience

worldwide, this is bloomberg surveillance on tv and radio. your equity market on the s&p 500 .0 five percent. some of these banks stumbling into the weekend. a little bit of a bounce. tom: more than any time in ages, no question about that. government has to get to the weekend. the smaller banks, maybe they are in defense of shorts. they have got to the weekend. the american job economy has got to get through the weekend. i am fascinated by the mystery around 185,000 nonfarm payroll. jonathan: that is the number in our survey. median estimate, 185,000, down from 236,000. lisa: that would be the lowest going back to 2020. less interesting than the headline number is, i am more

interested in average hourly earnings. that holds the key to whether the fed will feel the necessity to be more progressive. tom: you see the different banks. some of the major banks, they have this division, asset management, wealth management, there is some argument about what the fed path is june and july into august. that shows we are at that cusp -- we should all yesterday was lights off, i believe you were in your sabbatical. lights out yesterday about the tipping point we are at. jonathan: must have been the last 20 minutes, for the record. big shipping company worldwide. first quarter might be the best quarter of the year so far. some of these things do not concern this, do not correlate with this cyclical bounce a lot people are talking about. it does not stack up in a way we thought it would post new year,

waiting for this bouncing global both. lisa: this is why it is so difficult to get through a week. it is a model. a push and a pole. you have oil prices, shipping, this consideration of slow down the global economy. you have what looks otherwise resilient. consumers keep spending, that is what americans do. jonathan: equities up zero point 05%. bond market yields a little higher by a couple basis points. 3.40 on a 10 year. i feel like you rehearsed that. lisa: [laughter] i did not. jonathan: $90 billion in buybacks, that stock up by 2.04%. tom: diluted shares outstanding comes out to a very -- four apple with their mass, it is a jaw-dropping amount of share buyback. i put out a tweet yesterday. one people that stayed with apple through all of their

innovations, dan ives, the basic story is how many times have we heard apple is so done. it is over. no. it is not. jonathan: if you compare the numbers to the estimates, if you compare the numbers over the last year, it is a lot of declining numbers there. that we need to pay attention to. lisa: a lot of reliance on the iphone. the dominance of the iphone sales is carrying them. it is not services. that is an issue. tom: i went through the three accounting statements. what i noticed is everyone wants the fancy phone. they want this thing. they want this thing. they are up near $1000 per iphone. that is ridiculous. lisa: we are going to talk about the iphone and why you can pay for it. u.s. payrolls coming out at 8:30. this is going to be the lowest going back to the depths of the pandemic. our -- average hourly earnings

were supposed to stay around four .2% year-over-year increase, too hot for the fed's liking. jim bullard, told 45 time -- 1 2:45 eastern. i am -- berkshire hathaway's annual shareholder meeting in nebraska. interesting to see what he says about oil. they have increased their share of oil stocks at a time where any are wondering, why is oil so low? jonathan: i care about why they are not interested in the financial sector right now. that is the fascinating point for me. why they are not involved and sniffing around the regionals as they get cut in half in a single week. lisa: how worried are they about commercial real estate? what level do they step in verses, this is not our game especially given past rescue plans? jonathan: chief economist at city global wealth. payrolls out later this morning.

tom talked about the estimate 185,000. what are you looking for today? >> i cannot quibble with the consensus. we will see all but likely a slowdown, when we look at what is happened with unemployment insurance claims suggests not much has changed. remember back in january, suddenly, we had a half million new jobs in the market. this is because of seasonal distortions. now, we're supposedly going to be ramping up the hiring. if there is a downward surprise, i think it is largely because of that. because this time of year, all the roaring things that happen in the housing sector and other areas are going to add the payrolls up, but it may be shorted out as january was an upward distortion. that tells you a lot about what is important in the economy and how policy stimulus in past years is still delivering top growth, but it is going to be different. if we look out two years from now. jonathan: how well supported is

discretionary spending from the u.s. consumer at the moment? steven: reasonably, there is a lot of satisfy demand in goods. we have seen post a january surge. one of those things we question. it has done nothing but drop sequential. april auto sales were in good shape. this is an industry that is bucking basic google -- bucking a cyclical trend. i do not think it has a real recession in that particular industry. what is going on is pent up demand for leisure hospitality. in the last 12 months, we have had one industry that is 10% of employment account for nearly 30% of all job gains. it is still below where we were in covid. this is one of the reasons why just rebound from covid is still having an effect on some labor markets. cannot count on that for the next one and two years. lisa: i get what you are saying about goods. the reason i was talking about how americans love to spend, i

was taking that directly from kellogg's ceo who said all of their segments around the world, they seek declines in consumer spending except for the united states, where people keep spending despite pessimism. why are you moving away from u.s. equities at a time where the consumer is so resilient as elsewhere there is more is question -- discretion? steven: we have the world trading at less than 12 times expected earnings. the u.s. trading at over 19 times. with probably downside risk across the world. we have seen the u.s. dollar have a decade of gains through 20. you can see the u.s. has the most cyclical labor market in the world and most cyclical monetary policy. we are not particularly bullish. we do not think there is going to be a horrible collapse in the world or the u.s. we think the next few years we can have gains in currencies

that are still quite weak along the low valuations. we are going to start to gravitate to that and do it for more yield. lisa: this is a good question. if we see some sort of downturn globally, does this mean the dollar is not going to rally the way it has traditionally? steven: probably not. the question about the downturn in the world, we are less convinced of that. some of these things that happened, when you think about the shock from the war between ukraine and russia, the hit that occurred, the terrible terms of trade stock for many energy deporting regions, eurozone, u.k., japan, you saw currencies crushed last year. all-time nominal lows. as they have gotten through that, a good piece of their weakest economic growth experienced last year already. that is leading to upward revisions.

china, not everybody is confident it is going to come roaring back, but it is better when it is not shut down. the rest of the world is producing some subpar growth. it is the u.s. that has had all of this strength, 3.5% unemployment rate. i would tell you again the effects of past stimulus are weighing it. i think people who believe that your is this short policy lag and we know everything about what is going to happen from all that tightening in the last year, it has not -- to the economy. this is the reason the u.s. is settling down while the world is holding up. jonathan: wonderful to get your perspective. if you are just tuning in, welcome and. two names to focus on for regionals, pac west positive by 12%. western alliance up by 12%. these banks have been hammered in this week through thursday, the kbw regional bank index down more than 12%. phenomenal research, interesting

quotes from the south side. we believe the banks are having their gamestop like moment where social media is amplifying nontraditional approaches to assessing solvency. this creates a self-fulfilling prophecy at stock prices which leads to more questions. tom: shortselling was out there yesterday with a vengeance. i think there is a lot going on here than just trading dynamics in shorting and where is the tick role to help everybody out. i will take the point that the character of negativity on wall street has completely amplified by this modern technology. did you see the bramo move? in the studio here. and on camera. lisa: we are trying to get to the weekend. i have very loud body motions. i think, this is something we saw with the financial times yesterday. reporting out western alliance was looking for a buyer. shares crater. western alliance said there is no truth to the story, you guys are pawns of some short seller trying to make ain't.

this is the level of drama playing out in real time in public as people try to figure out what is going on. tom: let's get to the weekend. i have not seen jon in ages. lisa: [laughter] jonathan: distracting, isn't it? tom: it is. he did not see this out here. the bramo cam is about eight feet off the ground here. you can show that. jonathan: very distracting. very miserable tv on the next hour. s&p 500 futures positive .05%. tom: coronation saturday. [laughter] jonathan: the number is 185,000. that is the estimate. lisa: you can tell it is friday. with the first word, i am lisa mateo. the u.s. jobs report may show the resilience of the labor market. april's report expected to show that employers added 185,000

jobs and unemployment report ticked up 3.6%. that is only going to percent off the 54-year-old record. the jobs report due at 8:30 a.m. new york time. u.s. regulators plan to make the guest banks pay most of the bill when it comes to replenishing governments deposited insurance fund. small lenders will not have to kick in extra money. the insurance fund was depleted by the failures of silicon valley bank and signature bank. president biden reportedly will name the air force's top general to become the chairman of the joint chief of staff. that is according to the new york times. general charles brown, the air force chief of staff, would become the second black man to serve as chairman. colin powell was chairman under president clinton and george h w bush. a free-trade agreement between australia and the u.k. will take effect may 30 first. the australian government says the deal will in tariffs on 99% of the country's exports to the u.k.

it will streamline b's and business licensing between the country. sales of apple's iphone rebounded last quarter. that helped the world's most valuable company beat earnings estimates. sales fell 2.5%, but apple warned investors to expect a drop roughly twice as much. results suggest apple is recovering from a slump that has played the computer and smartphone industry. global news powered by more than 2,700 journalists and analysts in over 120 countries. i am lisa mateo and this is bloomberg. ♪

if you wake up thinking about the market and want to make the right moves fast... get decision tech from fidelity. [ cellphone vibrates ] you'll get proactive alerts for market events before they happen... and insights on every buy and sell decision. with zero-commission online u.s. stock and etf trades. for smarter trading decisions, get decision tech from fidelity.

>> we need to change the limit on deposit insurance. the situation we have right now is, we have effectively unlimited deposit insurance. the difference is that the billionaires who are taking advantage of it and the billionaire banks taking advantage of it are not paying for it. jonathan: senator warren making no sense at the end of those comets. what does that mean? tom: when politicians talk, we are trying to be as balanced as we can. i will let you pick it up. that was baloney. jonathan: i have loved the shift from politicians. i remember when they used to

talk about millionaires. now, it is billionaires. they are trouble. tom: there is headlines out now. i cannot remember where i saw it. the banks are with a vengeance going to pay for the new deposit insurance. jonathan: without a doubt, let's explore the points she is making on unlimited deposit insurance. take away the limit. if you've got to pack west, western alliance. western alliance will tell you the insured deposits represent over 74% of total deposits. pack west will tell you that number is 75%. you compare that to svb where uninsured deposits were more than 90% of the deposit profile. these two names, i think you would be hard pushed to make to reason these two names are in trouble because of that. and, whether that change in the fbi see rule around this would do anything for them. lisa: let's be honest. the billionaires she is talking about are the big banks she is going to put on the hook to pay for this and those are the ones

that had no problem and had deposits coming into their banks. there is a question at a time of, who is she going after given the proposal same to start some of the smaller banks in order to ask the biggest angst to pay for it? tom: seems like monday was two years ago. i believe i tweeted out on monday about the fifth two that the united states. that is what ultimately liberals and conservatives are arguing about, the scope and scale of this banking system. should we talk to an expert? let's do that. on the second bank of the united states and the fifth bank of the united states, chris merrimack is director of research. he has been excellent. my theme on this friday is, let's get to the weekend, friday. the banks have to get to the weekend. what should we see into friday afternoon and this weekend from troubled banks with new book value -- valuations that are shocking? chris: tom, i think the reality

is, most of these banks have security losses that are unrealized out of those are getting better as treasury rates fall. i think you could see some action from the fed or treasury to reinstitute the -- the thaad program from 2008 that was guaranteeing transaction accounts. i think most of these companies have much more stable deposit flows than anyone realizes. that is been the challenge, we have had this temper tantrum against the fed in using bank stocks as a weapon against the fed to try to get the fed to change. jonathan: well said. when you listen to some numbers coming out of banks, they are telling you deposits are stable. when you hear senator warren saying we need changes to the limits for deposit insurance, does that change the story this week? chris: not really. it is good she is supporting the changes in the limits, but the rest of the rhetoric is incorrect. lisa: what do you think is the circuit breaker to prevent this temper tantrum from rearing its head as we talk about the otherwise resilient economy?

chris: changing the short sale rule would help her it also instituting to some extent going back to the thaad program would be helpful. i would like to see the fed change the stress trust -- stress test program. the results were filed in april. the fed has an army of folks they could stick out to put this out next week. it would be useful to know most of the banks, if not all banks, have passed the stress test. if you look at the next 18 to 24 months of cash flow the banks have, it covers 500 to 600 points of loan losses, which is just as much as we had in the great financial crisis. i do not think those credit issues exist today despite worries on commercial real estate. if most banks looked at their loan portfolio, did a default, loss default given analysis, you would find credit losses are airy moderate in the industry. i think we should recognize those and what they are and the ability for banks to absorb those losses with existing earnings and capital. then, we can reinstitute

confidence in the sector. lisa: you should -- you said short-sellers. what do you think of the western alliance shares plunging after the financial times report and them saying, this is a tool of shortselling. is there validity to that? the think people will exploit the jitters, the temper tantrum? chris: absolutely. we have seen stories rehashed from six weeks earlier on pack west and western alliance. back west hired an advisor at the end of march. i do not know why we continue to create new narratives to help justify the positions. the facts are, these banks have very good cash flow. they have deposits that are much more stable. tom: your note is blistering. you see the press -- you say the press reports are stale. i know a guy, he is with the show quite often through the week. he is going to sit with his barons open on saturday and try

to figure out which bank to buy. how do you select the good banks from the troubled banks on a saturday morning as we have crashed? chris: we start with tangible -- value and apply the unrealized marks from hdm health and surety portfolios, that is disclosed in the fdic reports. that gets you to adjusted tangible -- when you look at the cash flow the banks have, the pretax, pre-provision or what we call ppr, is the cornerstone of the fed stress test. you apply that for the next 12 to 24 months. that gives you a loss absorption of the current loan portfolio. banks have got well disclosed information on loan loss allowances on their credit marks and the amount of real estate they have. banks have been a wide-open come ohno at this time, which is different than what we saw in 2008 and 2009. jonathan: divorced from the

fundamentals, i have heard that from a lot of analysts this week. the problem is, the fundamentals will be shaped by the price action. even if you think the price action has divorced from the fundamentals, does that not concern you? chris: i have lived it through 2009. hit a dollar in late february 2009. came back three months later and raise capital at six dollars. at the end of 2009, stock was $14 60 cents. i have seen that happen with many regional banks and other large companies. i feel like that is the repeat of that is going on in my world. we have to have the confidence to move forward, the facts are the banks have better credit quality, better cash flow than the investors understand. the bear case always sounds more intelligent, but it does not make it correct. jonathan: you think these banks are viable with 5% interest

rates the rest of the year? chris: absolutely. it is not ideal, they can make a spread. they can. we think the deposit flows are much more stable than the market understands. jonathan: wonderful to get your perspective. a constructive view from chris merrimack there. western alliance up 13%. tom: our job is to drive this story forward. chris was scathing about the press. i am not going to go after the press. what i am going to go after is, we have done a deposit analysis. this week, we got over word about the credit market, what is real estate doing. all of this is fine, people can decide, buy, hold, sale. we have got to figure out this commercial real estate ms.. that is not going to happen over the weekend. it is not a moon phase. it is like summer. restructure into autumn. jonathan: i have heard a lot of people say that this week.

lisa has, as well. it feels like this week morphed into something us, focused on credit, credit risk. lisa: and the idea the profitability stories question. chris was talking about, it is going to be difficult with a high percent regime, some might not be as good at it as others. some of them may struggle. jonathan: what spooks everyone right now, strategic options. you hear strategic options, you hear strategic options, you're like, i am running to the hills. sarah of wells fargo joining us shortly as payrolls friday and your estimate is 185,000. ♪

jonathan: two hours away from payrolls. here is the price action on the s&p 500. keep it together. lisa: you are going to blame me for that one? no. jonathan: positive 0.6%, four-day losing streak on the s&p 500. longest losing streak since february. let's see if we can do something about that later in the bond market. to year, what a range this week. to your right now, up by three basis points. tom: looked at the data today, do not know what to make about

it. i am looking at the 12 month trailing and dow fraction agreement, everything else slightly negative. i do not know what sticks out about -- the bond volatility will not go away with the 3.82 to year yield. jonathan: it is sticking. i do not do the fx check anymore. bramo does that. lisa: [laughter] 1.10. [laughter] tom: you watch lagarde more than i do. how did lagarde do? jonathan: they are certainly not done is the take away from the ecb. we are not the federal reserve. tom: the headlines had more meat to them yesterday. jonathan: she was clear about that, there is more work to do. i am hearing a lot of people say the same thing about the ecb off the back of soft data out of germany. cam relative, cyclical boom

stick in europe? cannot persist if the u.s. starts to slow down? what is that going to mean for people along this currency looking for that rate differential between europe, the united states to close and maybe see europe breakout? lisa: at this point, people can convince me of any narrative because they can show me data that is going to support it. the idea they see some boom and invest, etc., the idea they follow the u.s. on a six to nine month lag and started later, i buy that, too. it is a tough one to parse out. tom: i am not going to give my opinion on this, but. lisa: [laughter] but. tom: is europe more like japan, or is europe more like america? that is the triangulation. jonathan: i will spend the weekend inking about that. goldman expecting strongest job growth and morgan stanley, the most bearish. looking for job growth to slow

to 195,000. there is goldman at 250,000. tom: sarah joining us now, senior economist at wells fargo. the idea of nonfarm rate and nonfarm payrolls is distant from where we are. where do we get to a blended average sub 200,000 nonfarm payrolls down to a supposedly a rate of 100,000 or even 100 -- or even under 100,000? what is the timeline to get to normal, real economy job growth? >> if you are not talking a potential recessionary environment, the runway is still fairly long. think of the typical run rate, it is higher during the expansionary phase. as we see headwinds over the labor market continued to intensify, i think we are going to get there faster. we are looking for job growth to slow probably to that 100,000 range by the third quarter. potentially even turn negative

by q4. tom: socially, is it a white collar recession? we have seen the bottom quintile do quite good off of covid and the pandemic. is there a character to the slower job market we are seeing that is upscale? sarah: i think it is skewed towards some of more those white collar position, company headquarter positions. one of the areas we see that in terms of our -- average hourly earnings, it has decelerated sharply over the last quarter. if you look at the production in nonsupervisory, that is about 80% of employment. that is still running noticeably higher. that was up 4.2 percent annualized. you are seeing that sliver of where the weakness is, where earlier job cuts have been has skewed more towards those white collar or more professional jobs. jonathan: we started to get a

sniff of rate cuts in july, maybe at the next meeting yesterday off the back of price action. morgan stanley, ellen sattler, q1, next year for the first rate cut. where do you see the unemployment rate year end? how does that stack up to what the federal reserve is projecting and what is your call when this fed starts to go in the other direction? sarah: we see a similar unemployment rate by year end to the fed. we are looking at 4.5%. unlike the fed, we see them cutting by the end of this year. it is one thing to say, no, we are going to look through this. when you see a one percentage point jump in the on employment rate, well above the threshold for what is considered the economy is in a recession, we think at that point the fed has seen enough weakness coming down the pipe that is going to help further slow inflationary pressures that they do begin to cut later this year, most likely right now looking at that

december meeting. lisa: what would you have to see in the data, for example, in two hours time with respect to the unemployment market to change your view that perhaps the unemployment rate is not rising quickly and things are more resilient and that rate cut would not be needed? sarah: i think looking at the continued resilience of job growth. we have been expecting a slowdown for the past six months. we have gotten it to some degree, not nearly as fast as all economists have expected as indicated by the consensus undershooting what payrolls have printed. that is a big part of it. i think the wage dynamic is a different aspect. we saw tantalizing evidence of wage growth coming off the boil sharply at the average hourly earnings numbers. that was not cooperated with the labor costs. if you continue to see the labor market hang in there and point towards inflation taking even

longer to come down, that changes some of the pricing dynamics and where the fed cut estimates come in. lisa: we were talking to chris about the action and the general baking stocks. he said it was a fed temper tantrum, people reacting to this idea that could be vulnerability, the fed is raising rates, how do we deal with this. do you think as going to be the last temper tantrum to emerge? do you think there are other temper tantrums waiting in other sectors of the market? sarah: what we see when the fed tightens, even if it is at a measured pace like in 2004 to 2006, you can have later on some abrupt shifts. the impact of tightening does not all hit at once. that is not why we are not necessarily looking for a linear slowdown in terms of job growth as we move through this year. thus far, it has been what we consider a pretty orderly slowdown. that can shift as we move

further into this tightening cycle and the facts of what we have seen already take hold. jonathan: sarah house of wells fargo, thank you very much. let's talk about the jobs market. this came from the ceo of ibm. being a people manager when you are remote is tough. if you are managing people, you need to see them once in a while. you know where this is going. it does not need to be every minute. at least sometimes, somebody -- we encourage you to come in. we expect you to come in. we want you to come in. we want you in three days a week. tom: reporting from matthew boyle, i will get it on twitter. trying to change the culture at ibm, good luck with that. this is important on jobs day. they cut 5000, but in the first quarter, they hired 7000. then, he does not mince words on wf though. that is the phrase for 2024. we are jaded by this, the three

of us. jonathan: [laughter] tom: we are not thinking clearly about work from home. there it is. a huge debate. jonathan: we have talked about this, you can solve this easily. money. that is it. simple. tom: that will be the two to three year work out as all of a sudden commuting is going to be part of compensation. jonathan: if you want to live near the office, then whoever does that gets paid x and whoever does not do that, paid y. you have probably got access to cheaper property markets. tom: maximum bramo. lisa: you guys are picking on me today. [laughter] i cannot constrain myself. this is not linear. it is not like suddenly, we can all work remotely. i think that is what he was getting at, there is a cultural loss to companies that go entirely work from home. you end up having a hard time bringing them into the fold. if they do not work at the

office, it is not simply looking at the cost. it is also looking at potential for leadership, understanding the culture. if you look at what is going on now, there was a study that came out. among u.s. employees that can work at home, nearly half our hybrid arrangements. nearly one in five are fully remote with the rest tom: this is a con job. people are working three to four hours a day, doing get off of lattes. she has got all of her friends at cafés doing this. i am sorry, that is what comes out of the mouth of the middle child. jonathan: that is the word that kills me. culture. tell that to the 5000 people that got laid off. coming for the culture. do you want them to contribute to the culture? compensate them for that. if you believe there is value in their contribution to the culture, yet they are part of this family, when they get laid off it is like -- it drives me nuts, the culture line.

it really does. lisa: i am not talking about how everybody is part of a family. when i am talking about is having relationships with people that make it worth coming in every day. there is a sense of idea building and spontaneity that gets built with that. it is the culture of interpersonal relationships, not necessarily the culture of -- jonathan: [laughter] even you believe this. tom: [laughter] jonathan: can i say on the meeting stuff, can you pull yourself together? you know that was -- anyway. i agree with you, but if you believe there is value in it, compensate people for it. lisa: i would agree. jonathan: all roads lead back to compensation and money. they do. bottom line. bottom line. lisa: i think it is important to also have a feeling of connection to what you do every day. how many people are just having lattes and do not have connections? [laughter] tom: the middle child is skating on this. jonathan: need up or management

to come in and teach the kids. it is about senior management coming into teach the kids. that is it. lisa: who was it that said you cannot really get promoted if you do not come in? tom: the ceo of ibm has alluded to. jonathan: pick your career track. if you want to progress, put on a suit, come to her, do your best. i would be that guy, i know i am. that is what i would do. if you do not want that lifestyle, it is not for everyone. if you want to stay from home and have the backyard and the open space, great. whatever. tom: the australian philosopher james gorman said it best. if you are going up to dinner in soho, you can come up to work. [laughter] jonathan: that is true. the culture. lisa: ok. all right. [laughter] jonathan: the culture. all right. tom: kumbayah. jonathan: sit there and lay off

20% of the family. kids, this month it is tough. you are out. this is bloomberg. ♪ lisa: ah, lisa. keeping you up-to-date with news from around the world. in just a few hours from now, the labor department will issue its monthly employment report. expectations are that payroll growth probably slowed in april with 180 5000 jobs added and unemployment rate tipped off slightly to the .6% from historically low levels last month. president biden's national security advisor jake sullivan heads to saudi arabia this weekend. it is a sign the administration's push to smooth over rocky relations with the kingdom. bloomberg has learned among the people sullivan will meet with is crown prince ben solomon. secretary of state antony blinken will go to saudi arabia next month. bmw is the latest automaker to

upgrade its recall of vehicles with the airbags. it is telling owners of the 90,000 sedans and suvs not to drive them until the defective equipment has been fixed. recall covers older vehicles. the airbags lamed for at least 25 deaths in the u.s. icahn enterprises issued a dividend to investors after coming under attack from short seller hindenburg research. that is -- that sent the stock up by double digits after falling more than 40% since the release of the hindenburg report. hindenburg claims icon enterprises value is inflated by 75% or more. global news powered by more than 2,700 journalists and analysts. i am lisa mateo and this is bloomberg.

>> if you are not going to buy the stock and warren buffett is not going to buy the stock, -- is going to buy the stock. it is a challenge to the extent

he a to broaden his supply chain and move out of china to some degree. the good into india, he has a footprint of what he did in china. jonathan: great to catch up with the senior research analyst at ta davidson off the back of the sample numbers. apple positive in the free market by 2% looking at the broader market, one hour and 44 minutes away from the payrolls report. jobs day in america, looking for 185,000. big names looking for a number bigger than that. goldman looking for 250,000. tom: if i look at the standard error of nonfarm payrolls, everybody sliding into this board. i am wondering if we are set up for a shot. no one is looking for, oh, oops. jonathan: do you lean either one way? tom: i do not. i am qualified to do the gueststimate -- guesstimate.

wages will be interesting with unit labor costs. we will get there at 8:30 this morning. on apple, he has decidedly -- is decidedly not a fan boy. he joins us now from street research. what i love about him, he has got a distance to them. he is not four miles from a latte shack on cupertino. thank you for joining this morning. i want you to quantify the impact of a price for an iphone approaching $1000. everybody wants the fancy iphone 14 pro. i want you to quantify that $1000 because the wireless cell phone companies are helping out apple. we are not paying $1000 for a phone, are we? >> yeah, you know, if you had

asked me that question five years ago, i would have told you, no. nobody would spend $1000 on an iphone. i would have told you, while this company is paying for the iphone, you pay them back. with this monthly price plan. i would have gotten that completely wrong. what apple demonstrated is a strong pricing power. maybe positively improve the liquidity of that product and get you to pay for that. what you see today is financially, 2023 is a tough year. everybody is suffering. chip suppliers. what we saw last night, i have heard despite having a crank up these prices so much is actually seeing an iphone business that is not doing great. they face a lot of pressure. demand is not very good. on a relative basis, apple is doing impressively all right

going through the storm. tom: if we look at the income statement, i am going to call you middle of the road and not a fan boy on apple. it is the durability of that pricing power the heart of the matter? is that the future for tim cook in cupertino? pierre: i like the fact you put me right in the middle, because that is one issue with pricing power. you do not get your average price going from $600 to $1000. then, again and again and again. that is the reason today, it is difficult to benefit from these strong unit prices and the scale they have today. the future has to be elsewhere. we are not -- we do not think apple can stable pricing a second time.

that is the reason why we are the middle of the road thinking apple is a good business, but gross control of earnings power of the business now that the iphone is $1000. jonathan: this is such an important conversation. what is amazing about apple is, the most researched product on the company and is still, there is this debate in how to value it. what is it? is it a growth company, a luxury company with that margins? you are saying we are testing the limits of how far we can push pricing. is it stable? what multiples should you put on this name? pierre: this is the conversation we had this morning. it is a difficult question. if you look at apple today, it is trading roughly between 30% and 50% premium on the s&p 500.

you pay 50% premium to buy a business showing resilient earnings today. when things go wrong and are getting tougher for everybody, it is getting easier for others. you are paying that premium on a business that cannot grow earnings more than 5% to 10% a year on a normalized basis. unless you get into -- changing the world with an ai headset, they cannot grow earnings more than 5% or 10%. what will you earn? it is more expensive because there is a quality premium. it compounds 5% to 10% a year. it is not like a bad deal. it is not super compelling.

now the question is, could it be worth to x the s&p? it is a debate of if you get to the next quarter, saw -- they are going to be making more than $.50 group with services. tim said on the call yesterday, they are approaching one million subscribers on their products. that is where the premium you pay, we know the compounding power cannot escape gravity like 5% to 10% is what you have to live. the inequality of earning is a difficult question. it is hard to have a fair answer. lisa: there is a elephant in the room, the $90 billion in buybacks and the increase to 4%

dividends each quarter given the fact that this is a company that can afford to flush the market with cash. how much does that push away these nice, neat valuation arguments and challenge the idea of a stop going down significantly from here as your price target suggests? pierre: yes, on -- the price target is not calling for a stock -- going forward. it is a price target once a year, you put it into the perspective of wind we have baited it. it tells you we do not expect much to happen on this, to be honest. on the dividend, the buyback, of course it is boosting how much

compounding you can expect on the stock. that is the thing. what is my total return? if earnings power, free cash flow, these metros -- metrics grow 5% to 10% a year, that is a 5% to 10% return. the company pays the dividend, that grows 4% a year. that means my dividend is not additional value to me. how much is a dividend as a percentage of the value of the stock? what is a dividend yield? because it is trading on a fairly high multiple, you are talking maybe 8% to 12% total return how much you get with your dividend and how much because the company is growing. as i said, middle of the road. it is not bad. i definitely do not think it is bad.

you do not have an outperformance of opportunity. you need more than that. which would be the stock re-rates from 30% premium to 70% premium. or, apple almost reinvents itself again with an ai headset or a car or something really new. these are the things that would move the needle beyond an 8% to 12% return. jonathan: four spend time on a call talking about ai. really thoughtful stuff, thank you. that stock is positive this morning, 2% in the premarket. tom: you've got dan ives in the 9:00 hour who is going to reframe, everybody is catching up at the $205 target. i saw a lot of 100 90's. jonathan: is it a growth company anymore? that is the conversation. coming up, it is payrolls

friday. what will you do? will you make something better? create something new? our dell technologies advisors can provide you with the tools and expertise you need to bring out the innovator in you.

when i was his age, we had to be inside to watch live sports. and expertise you need but with xfinity, we get the fastest mobile service and can stream down the street or around the block! hey, can you be less sister, more car? all right, let's get this over with. switch to xfinity mobile and get the best price for 2 lines of unlimited. just $30 a line per month. i should get paid more for this. you get paid when you win. from xfinity. home of the 10g network.

these days, our households depend on the internet more and more. families grow, houses get smarter, and our demands on the internet increase. that's why we just boosted speeds for over 20 million xfinity customers, on us. so you get more of the speed you need for day and night streaming. more speed you need when you're work from homeing. and more speed you need as your family keeps growing. check in on your current speed through the xfinity app or upgrade to the speed that's right for you today.

>> the stars are realigning with interest rates, the banks, the debt ceiling. >> the fed is dealing now with not just a domestic inflation problem. this is global. >> you're looking at a potential downturn in the economy relative to strength everyone was looking for. >> this is another expression of financial cracks appearing in response to the fastest rate cycle since the 1980's. >> are the central bank inflation targets to high? the answer that -- to that is

possibly yes. >> this is bloomberg surveillance with jonathan ferro , tom keene and lisa abramowicz. jonathan: payrolls report 90 minutes away. your equity market positive by .6%. banks have been hammered. we are looking for a bounce on pac west and western alliance. pac west and the premarket up to 18%. tom: i take your point. it is not just about payrolls. payrolls is a mystery. i think it has been underplayed. nobody cares. what we care about is our local bank. we care about banks in the news. the reporting from bloomberg finance has been great. they healed and let's get to the weekend friday. jonathan: before we can get to the beat -- to the weekend,

let's talk about the mystery of payrolls. 185,000, the estimate this morning. lisa: and exportation of wages to increase. people are talking about how they are not expecting a big market reaction. there is a question of what is going to be the bigger surprise. i wonder if the playbook or 2023, have a bias, stick to it, repeat. you can play the narrative, take whatever data points he went, that is the same today as we get payrolls. jonathan: we got the prices paid component, ism manufacturing, rates went up, yields went higher. the rest of the week was about financial stress in originals dragging yields down. for many people who have got that great cut all later this summer, the data is about something else. lisa: we have data that highlighted the stickiness of inflation. people say you are cutting into year end, there is this disinflationary force.

how much are we looking at this stasis in markets regardless of what we get in about 90 minutes? jonathan: looking forward to that number in 88 minutes time. there it is. tom: you are fired up today. lisa: who are you talking to? jonathan: in the bond market, yields higher by three basis points. 3.40 on a 10 year. euro, 1.10. tom: we will have to see from that. i look at the data and i go back because i did on monday to the two year yield, what was it, 4.10? you look at that 8:30 and follow the bank data. that is your friday. jonathan: reclaiming 70 on wti, one to watch in the oil market. lisa: that is been a mystery with people saying the fundamentals do not cohere with weakness in oil prices. 8:30 a.m., u.s. payrolls report

for the month of april. it will give us a sense of where the labor market is, particularly with wages if they come in around the same 0.3% month over month. we are not seeing a decline in terms of the pace of increases. that will present a challenge for the fed. fed speak today includes jim bullard, lisa cook. people trying to parse out where the dissonance lies, the dissent on the fed we have not seen in voting. this weekend, berkshire hathaway gets together in omaha, nebraska. they have a 5k on sunday if you want to race. it is called the annual festival -- annual shareholder festival. jonathan: that sounds like a cold. what you are describing sounds like a cold. -- cult. lisa: check it out. i was looking at the website. tom: it got as jon respectfully

says, cult-y. jonathan: feels like the right word. tom: in the last hour, bramo brought up this idea of buffett and his team and hydrocarbons. that is what i would take notes on this we can. occidental petroleum and the rest. lisa: they said in 2008 they would never invest in oil. now, they have loaded the boat where they have highest concentrations in oil going back to early 2000. bank, are they going into regionals given the fact that traditionally, they have been part of the rescues and now they are raising concerns about commercial bank valuations and some assets on those? jonathan: the sound of their silence has been deafening around this story. we got a preview from the vice chair of berkshire hathaway. if you have not seen that, look for it in the ft from the last week. i thought there was strong indication as to whether they were going to step it or not. lisa: why would they if they are saying this is a huge canard,

something that is problematic and going?to have longer-lasting effects now they are going to come in? i am not a psychic. jonathan: run a 5k and invest a meeting. lisa: [laughter] jonathan: can you imagine? head of global race, we will not be going to at or running that 5k anytime soon. good to see you. let's talk about these numbers out later. lisa is on the money. does this data matter to this bond market this morning? >> i do not think so. we think the reaction will be symmetric. if you get a weaker number, i think the market is on what we are calling a recession a learned. that recession alert starts to flash more if the data is weaker. we are looking for slight downside surprise. we are looking for 150,000. i would highlight anything above

190,000 is above trend. it shows you how difficult the situation is for the fed and a market hoping for fed relief. for a quick fed cut, that is not happening. tom: people are shellshocked when you look at the three-month 10 year spread and the other spreads that are out. 2, 3, four standard deviations. where does the 10 year settle out 12 months from now when we de=shock? -- de-shock? priya: 12 months is an easier call. a lot of lads from monetary policy as well as lads from credit conditions, the they are tightening as we speak. i think they start to play out. 12 months from now, we think the fed is aggressively cutting rates. if inflation is above 2%, it will be much lower than where it is now. tom: give me a number. are we going under 3%? is that the news of may of this year? priya: yes, we are. i think we could get there by

the end of this year. we are looking at 275,000 with a fed cutting aggressively. lisa: i want to go back to this idea the data does not matter at a time where people basically are saying we have not seen the effects of everything. we have to wait for a bit. what are you looking at in the meantime to get ahead of that? is that the senior loan officer survey, or do we find out from a fed chair it is going to confirm what we have seen? priya: we will be watching the details of the senior loan officer survey. what is the endgame for the banks? there is a game of chicken between larger banks that one to wait for the fdic to take a loss. the smaller banks who get lower in terms of valuation. what is the endgame? does the fdic keep getting worse? is this a slow burn? we are thinking this is somewhat like the savings and loan crisis where banks continue to fail. that is going to tighten lending

standards. as much as the sluice report is going to be important, we are watching for how much worse is it going to get. i am also watching what is happening on qt. it is the least appreciated form of tightening. as long as the fed is doing qt, deposits keep leaving the banking system. they are leaving the baking system for money market funds. they are being extinguished by the fed. does the fed do anything with qt, i am not hopeful they will. i am watching fed response, what is happening with the banks and real rates. as long as real rates are worth of 1% or 50 basis points, that means policy is restrictive. policy is restrictive, we have to see the lads play through. that is why our conviction on the slow down continues to trend stronger. i hope there is an in game quickly for the banks. if there is not, we have to reassess how much the fed is going to have to cut next year.

this year, they are going to be reluctant to cut rates. when it is clear the unemployment rate is close to 5%, i think at that point, we have to reassess the fed is going to -- a lot. jonathan: i'm interested in your interpretation of chairman powell. did you get the impression he was saying there is reason to be calm because there is reason to be calm around financials, or did you get a sense he was saying that because he's got no choice but to say that? priya: i think it is both. essentially, they are trying to buy time. it is not up to the fed to solve the banking problem. they did what they could do. they cannot solve the capital problem. that is something the private sector banks have to do. that is something being fdic has to do. what the fed is trying to do is say, the ball is somebody -- is in somebody else's court. all we can do is provide liquidity and buy time. i think he was trying to buy

time. if the bank start to stabilize, i think the fed can potentially hike further. he was noncommittal in our view. jonathan: you are not of the opinion this regional banking system is struggling with 5% interest rates? priya: they are, but it is the fed's job to help the banking system right now. i would say this idea they can separate monetary policy for financial stability, i disagree. we have monetary -- on a terry policy works through the policy system. some of this tightening is the intended consequence. this is for the private sector and government to figure out what happens with regional banks. i think the fed has a clear mandate from congress, the labor market as well as inflation. i think they can pause. they are not going to want to cut soon. they do not have to cut more. as much as the -- what would help the banks, the fed starts

to cut rates significantly rate i do not think that is the reaction function of the fed given the economic data we are living with. jonathan: inflation still at 5%. thank you. with more conviction about the slowdowns around the corner. tom: absolute tour de force you heard on a time frame of three months. her timeframe of 12 months. can you imagine these banks and the salvation they feel when they price up, yield down bond recovery? a distant version, -- dis-inversion? jonathan: equities right now positive .6% on this payroll friday. this is bloomberg. lisa: keeping you up-to-date with news from around the world with the first word. the u.s. jobs report may show the resilience of the labor market. april's report expected to show employers added 185,000 jobs. the unemployment report ticked up 3.6 percent, only .2% off the

54-year-old a. jobs report added -- out at 8:30. u.s. regulators plan to make the biggest banks pay most of the bill when it comes to replenishing government's deposit insurance fund. small lenders will not have to kick in extra money. the insurance fund was depleted by the failures of silicon valley bank and signature bank. president biden reportedly will name the air force's top general to become the chairman of the joint chief of staff. that is according to the new york times. general charles brown, the air force chief of staff, would become only the second black man to serve as chairman. colin powell was chairman under president clinton and rhgh w bush. sales of apple's iphone rebounded last quarter. that is help the world's most valuable company earnings estimates. sales fell 2.5 percent. apple warned investors to expect a drop of roughly twice as much. results suggest apple is recovering from a slump that is

plagued with the computer and smartphone industries. there is a sign the electric vehicle price war in china may be taking its toll. shipment from the tesla factory in shanghai hello most 15% from march to april. tesla triggered a slew of discounts and incentives offerings from other carmakers when it slashed prices of its chinese made ev's at the start of the year. global news powered by more than 2,700 journalists and analysts in over 120 countries. i am lisa mateo and this is bloomberg. ♪ the first time you made a sale online with godaddy was also the first time you heard of a town named dinosaur, colorado. we just got an order from dinosaur, colorado. start an easy to build, powerful website for free with a partner that always puts you first. start for free at godaddy.com

>> we need to change the limit on deposit insurance. the situation we have now is, we have effectively unlimited deposit insurance. the difference is that the billion heirs who are taking advantage if -- advantage of it and the banks taking advantage of it are not paying for them. jonathan: that is the control room winding me up, playing that again. can you translate that? what does that mean? lisa: i am advocating for you, common person. jonathan: there was nothing wrong with that. did it make sense? tom: let's assume the bad --the bank thing continues on and it is a slow-motion thing.

whatever anybody's theme is. we end up with seven guys standing up with james fraser with their arms in the air. it is going to be a photo opportunity in front of congress. then what? what are they going to do? they're going to pass, what, certain deposit insurance? they will do something there. jonathan: when she is talking about the billionaires taking advantage of it in the billionaire banks taking advantage of it, what does that mean? tom: i have no idea other than she is conflating a marketing plan to give mark zuckerberg to percent mortgage as a billionaire with what is going to happen with the big banks on park avenue, that are going to pay a ton of fees. pnc in pittsburgh is going to pay a ton of these, etc. because of this banking debacle. lisa: the past couple of months has made the political narrative complicated around the banks. it has been popular to bash the biggest banks as being too big to fail, sources of stress. this latest banking crisis may

have stepped up and they have been stable. how do they go after them at a time when at least from a political standpoint they were bad actors? who do they go after, regional banks that have a lot of votes for -- this is the calculated political that makes it difficult to understand. jonathan: if there is anything you do not like these days, you just put billionaire in front of it. so much worse. we are after the billionaire whatever. it is meaningless stuff. ultimately meaningless stuff. tom: we will cover this on balance of power starring a cast of characters. kailey leinz out there last night, i believe. annmarie, i about fell over in the washington post this morning as governor reynolds of iowa is going to drag us back to the child labor laws before i was

moving bags of oats around at and amboy one million years ago. i was thunderstruck by the language of iowa to get 14-year-old kids in "constructio n and demolition." what in gods name is going on in washington and our states on this jobs day of kids 14, 15, 16 having real jobs like that? annmarie: this is not actually a debate in washington. this is taking place at state let's start in iowa. you have critics coming up saying this is bringing us back to a time, this is unsafe. others are saying, this is good for accessibility for individuals and their teens to get access to the labor market and could potentially work until 9:00 p.m. and other provisions. but, i think what you are hinting at, the fact that it is jobs day in that what we are

seeing in a lot of states is they are struggling at times with this type labor market for certain jobs, especially as we see more manufacturing plans given what you have with the chipset, the inflation reduction act coming back to america. tom: i'm going to quote this verbatim or get in trouble. this is verbatim to my editors. it bars workers younger than 18 from working in "establishments where nude or topless dancing is performed or co-i have never seen a story like this on labor on this labor day. this is not a washington discussion, this is what is going on in the middle of america. lisa: what are we talking about? why did that strike your interest? tom: we spent 100 years trying to get labor laws across a broad swath of america. help me out with england. jonathan: you keep digging. lisa: [laughter] what are you talking about? jonathan: do you want the

elephant in the room? unemployment in iowa is 2.8%. tom: well done. lisa: this goes to the labor market report we will get, not necessarily children working in topless establishments. i wonder if this is a good thing or bad thing for this administration. annmarie: friday. lisa: tell me about it. what is washington expecting with the labor report? how are they going to spin it when it comes out? priya: the administration is constantly trying to wind -- find one great part of the labor report, usually it is the cpi data. they spend that forward. obviously, if it is a low unemployment number, they will say they have added x, y, z number of jobs. they have this pre-pandemic record low on unemployment because of the joe biden economic agenda. if there is slowing of the labor

market and we do see the up limit rate tick higher, not lower, the administration will come out and say, we need to be seeing this. we need to see a controlled slowdown in the economy to make sure what the fed has been doing is working. either way, you are going to get a spin. jonathan: is anyone planning any legislation in washington with regards to the banks? is the white house promoting legislation passed through congress at all? the comments i heard from karine john pierre yesterday, i think we turned them into a promo. said something like we are monitoring regional developments. meaningless stuff. they go into these press conferences, they take that big book and someone asks about the regional banks and they flip through it. they get to page whatever. we are monitoring the situation with regional banks. what does that mean? annmarie: that means they do not want to speak about the banks, but they have to have something

to say. so they are monitoring it. in all seriousness, there are people at the white house who would be monitoring the banks. the locks -- the likes of the head of the international economic council, janet yellen, they are looking at what is going on. what they are doing in terms of the concerns around the regional banks is, any chance they can get, they are talking about more regulation. they point back to the rollback of these dodd-frank will laws, which are passed in a bipartisan way under the trump administration. what they are saying is congress should be doing more and there should be more regulation. from the republicans in congress, the regulation is already there. supervisors were just not using it. jonathan: annmarie down in washington, d.c. bramo with the lean. lisa: can i give a public service announcement to politicians? when they say certain phrases --

an existential week for you, you have gotten to the point where it is all meaningless. jonathan: it means nothing. lisa: people are trying to parse through a nuance. i keep going back to that. they cannot be light, we think it is ok, we are not sure. jonathan: what i care about is policy. what i hate is politics. when you start talking about regulation and rollback under the trump administration supported by some democrats in congress, by the way --when they do that, great. that makes sense for a long-term approach to the financial system. i think we are on board, that is something we should discuss. in the immediate, we need to talk about, ok -- do we understand how they have diagnosed the problem? is it something that needs to be addressed with fdic deposit insurance? in which case, we should be pushing congress to do something. is it because interest rates are too high? at the moment you've got thanks

failure after bank failure in the united states of america. i am not convinced they have any idea of what they think about other than monitoring it. lisa: when you asked her this question -- she said, both. how much? is that policymakers are they getting a handle on it, are they? at what point do you sacrifice the idea of pushing the markets for credibility? jonathan: equity futures positive .7%. u.s. payrolls report about an hour and four minutes away. ♪ ♪ welcome to a new era of energy. ( ♪♪ ) unique style, ( ♪♪ ) cutting edge innovation... ( ♪♪ )

...and thoughtful details... ...inspired by you. ( ♪♪ ) from the brand that delivers amazing ownership experiences, this is the first ever, all electric, rz. this is lexus, electrified. we moved out of the city so our little sophie could appreciate nature. but then he got us t-mobile home internet. i was just trying to improve our signal, so some of the trees had to go.

i might've taken it a step too far. (chainsaw revs) (tree crashes) (chainsaw continues) (daughter screams) let's pretend for a second that you didn't let down your entire family. what would that reality look like? well i guess i would've gotten us xfinity... and we'd have a better view. do you need mulch? what, we have a ton of mulch. hi, i'm jason and i've lost 202 pounds on golo. so the first time i ever seen a golo advertisement, a literal ton. i said, "yeah, whatever. there's no way this works like this." and threw it to the side. a couple weeks later, i seen it again after getting not so pleasant news from my physician. i was 424 pounds, and my doctor was recommending weight loss surgery. to avoid the surgery, i had to make a change. so i decided to go with golo and it's changed my life. when i first started golo and taking release, my cravings, they went away. and i was so surprised. you feel that your body is working and functioning the way it should be and you feel energized.

golo has improved my life in so many ways. i'm able to stand and actually make dinner. i'm able to clean my house. i'm able to do just simple tasks that a lot of people call simple, but when you're extremely heavy they're not so simple. golo is real and when you take release and follow the plan, it works.

jonathan: someone message me about a month ago or six weeks ago and said, jonathan and lisa are on air talking really fast, it must be serious. i am not sure today serious. lisa a: yes, if it is sunday night and jonathan and lise are speaking really quickly, it must be serious. jonathan: that was just mumbling, not fast, don't worry. the nasdaq is up by 0.7 s&p is up about the same amount. the longest losing streak going back to february if we close the way we were on thursday at the

close, it would be the worst close of the s&p 500 since svb failed. russell is up by more than 1%. outside of that, apple doing ok. up to .3%. they beat estimates after the close. in the bond market, a big range on the two-year yield. up 0.0326 percent. on the 10-year yield, we have come back up. tom: with the data check, it is the idea that the bond market will not borrow from angry beavers. if you told me the bond market that you just verbal-ed, i was a 3600 in a heartbeat but we are not. jonathan: who are not too far off that level the last couple days. about the equity markets, banks failed in march.

the s&p 500 was up on the month. we had a feeling in april and went into may with that. it has been pretty resilient in the trading range still sticks. outside of that, let's get to the foreign exchange market just to wrap it up for lisette. 1.10 against the u.s. dollar. basically unchanged on the session. lisa a: that is cool. talking about stability, apple is up about 2.5% after earnings yesterday. how much is that the entire story? about stability in the index. we are talking about a tech rebound, but not what we necessarily saw in underlying stocks. apple up two point 75%. people seeing the behemoth. pac west, western alliance, and metropolitan bank all up. lead bipoc west.

shares are up almost 20%. why? we do not know. they talk about the decline in the emergency windows. i do think a lot is attached to first republic being taken out the estimates. what can be gleaned from that? it is sort of like pick your narrative in this tale of roulette. i want to point at some other shares that have been reacting to earnings. carvana, that was like the zombie left for dead. those shares are up almost 40% after saying they will return to profitability. their shares were of $250 a couple years ago. so that is still pretty far down from where we were. also seeing doordash up almost 4%. people are still getting salads delivered to them and for i. and lyft, shares are promising -- are plummeting almost 16%

after they are struggling to compete with uber. jonathan: because they are not uber. it is that simple. lisa a: and this is a tough market. jonathan: lyft down a little more than 15 percent. ray farris of credit suisse and the team expecting payroll growth to slow to $190,000. saying, broader labor data points to some deceleration in job gains, and the composition of the recent payroll releases suggest that employment growth in the most difficult sectors is rolling over. tom: repairs is chief economist at credit suisse but far more with important tours of duty on the per civic room which gives them a different perspective. let's talk about the american labor economy. i am told the -- is 100 thousand

payroll. maybe 120,000 or 85,000. but the numbers were distant from that. we still have a point labor economy. ray: we have a forecast of 190,000 since the adp numbers came out. the thing to do here is get pre-paranoid. think about where we were in december of 2019. we had an unemployment rate of 3.5%. the six-month average for payrolls, at time when the economy was clearly go -- growing andor was talking about -- and nobody was talking about inflation, it was 160,000. we are about to get over 200,000. the problem the fed has is not recession. the problem the fed has is too much growth. jonathan: what are you seeing in cyclical sectors right now? is there any sign whatsoever that interest rates increase the

last 12 months and ask to buy in some shape or form? ray: what is beginning to happen is the goods sector is beginning to soften. housing is beginning to bite into elements of employment, in real estate, construction, and those types of things. for this level of gdp, the economy is running at least one million jobs short. the one million jobs short is in the services sector. i'll care, travel, and entertainment. there is some degree of rollover in goods and construction. but we will still add jobs in the services sector. that is a fed problem. it is not so much the average hourly earnings and wage growth, but that we keep printing lots of jobs. people have jobs, they have money, so they go out and spend. lisa a: you say this is basically the good does

recession -- godot's recession. we are not going to get any downturn, rate cuts are completely off the table, so this is something we see in the economy for a stock time. ray: the economy is slowing. we were 2.6 percent in the fourth quarter, 1.1% in the first quarter. we'll probably go down for the rest of the year. i think markets are overpricing the likelihood that the fed will cut rates by the end of the year. i think they are too optimistic about that. you cannot have a bust if you have not had a boom. the credit sensitive parts of the economy, thinking about getting a credit crunch of sorts, they are business equipment spending, rent structures, residential and commercial, and if you look at those things, business equipment spending is 7% below trend.

everybody talks about commercial real estate. business structures and investment is 16% below is pre-pandemic average. residential construction is 6% below its trend and we have a shortage of houses. tom: on the per civic room and china challenge -- on the pacific rim and china challenge, do you believe in a 6% china gdp? can they get it done and persist with that? ray: they can definitely have 5.5% or 6% for the year. growth will probably slow back down to, if they are lucky, in 20, high fours. the problem is it now has a policy environment and a political environment that is a major constraint on the private sector. crucially, for the global economy, for us in europe, that

recovery is very insular. it is all about domestic services. you are seeing recovery in growth but a fall in imports. it is not having any meaningful spillover. jonathan: are they leaning toward chinese brands? what are you noticing about the nature of the domestic coverage and the domestic services boom? ray: it is about going back out to restaurants, travel, and the focus domestically. china had bouts of lockdowns, but it never had a big shutdown of its manufacturing complex. any factoring is not actually below trend. consumption of goods is not below trend. it is below his consumption of domestic services. that does not use a lot of copper, and does not use capital goods. jonathan: ray farris of credit suisse. we are around one minutes away from the credit report.

coming up, jeff rosenberg reacting to those numbers. a fantastic line up in the next hour. welcome to the program. this is "bloomberg surveillance", looking for a number of 185,000. that is the median estimate of the survey we conducted monthly. that is down from 236,000 previously. tom: let's go over payroll one 01. the standard error of this is huge. if you have a pic around number of 200,000, what is the point where you can say, i did not get it right but i was in the area? help me with that. whatever it is, the standard error, is it ray farris football field wide? jonathan: should be just ignore it? tom: a lot of pros do. lisa a: the pros do but the market is usually somewhat.

what everyone is saying in terms of pic where bias and stick with it, what do you think an upside surprise would do with this? tom: 250,000 away from ray farris and the others. that's the question. jonathan: it would reinforce this idea because they would have to keep pushing out the cool for higher unemployment. lisa a: do people capitulate or do they say no because the financial stability peace into play? people can make the argument to confirm their narrative. it is convincing either way. jonathan: as you mentioned, these cuts are priced in for later this summer. soli that is happening, and built up yesterday. because of financial stress in the region, it has nothing to do with this info today. lisa a: and there is the question of idiosyncratic. ray: if i could chime in, the

way to think about rate cuts by your end fire insurance. they are basically the market saying the direction is something is going to blow up or could. if it blows up, the fed will cut 300. we have to have fire insurance. jonathan: you are not the only one saying that. i have heard people saying either we have priced -- cut too much or not enough. tom: they will just cut it like mohamed el-erian did. jonathan: i don't mind. in the equity market, s&p 500, positive 0.7%. payrolls are 48 minutes away. lisa m: keeping you up-to-date with news from around the world. with the first word, i am lisa mateo. like jonathan said, in just under an hour from now, the labor department issues its monthly employment report. expectations say it may have slowed in april with 185,000

jobs. and the unemployment rate picked up slightly to 3.6 percent from historically low levels last month. jake sullivan heads to saudi arabia next weekend, as a sign as the administration's push to smooth over rocky relationships with the kingdom. among people that he will meet with, it is the crown prince. in serbia, president alexander drueke encz promised there would be significant tighter gun restrictions after two mass shootings last week. his school massacre in belgrade and a shooting rampage outside the city left at list 17 dead and 21 wounded. the u.k. is preparing for its first coordination in 70 years. king charles iii will formally accept king edward's crown saturday at westminster abbey. the coronation is expected to be

a gift from the countries pubs and restaurants. because it is a national holiday, they speculated it could lead to a slight drive on gdp. british airways in iberia raise profits after a surprise. the airline industry bounce back from the worst pandemic slump. the company benefited from lower field prices -- fuel prices but demand driven up faster than inflation. global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo, this is bloomberg. ♪ ♪

♪ (upbeat music) ♪ ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) -awww. -awww. -awww. -nope. ( ♪♪ ) constant contact delivers the marketing tools your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall.

>> apple generates a ton of free cash flow. if you will not buy the stock and warren buffett will not buy the stock, apple will buy the stock. tim cook is an amazing ceo but

he has a challenge to the extent he has to broaden his supply chain and move out of china, to some degree. the good news is as he expands in india, he has a footprint of what he did in china. jonathan: tom forte, the research analyst at da davidson. apple up in the premarket going into payrolls. about 44 minutes from now. the regional banks were earning trouble yesterday and are doing better today. pac west western alliance up more than 15%. this line coming through from andrew hollenhorst of city who said on monday, we prophesies the revolution of first republic withdrawing line under the period of deposit concerns and focus on macroeconomic development. we were wrong. deposits have been stable since late march in's have not sought out new emergency liquidity from the fed.

it is more about general confidence than deposits. tom, that would be a more difficult issue for regulators to address. tom: i notice i would say wednesday, it has been such an exhausting day that i am not sure which data quote bible say monday -- wednesday. there was a flip. but now we are looking at normal market bonds and credit dynamics. you even take it further and say, it is not about credit dynamics but about crazy bond pricing we see within a basic bond data check. you can pick your medicine there. or maybe it is all three. we are going to see this extend out. >> you have done a great job of just going through many from there. on deposits, it puts them in a tough spot because every time they talk about them and say things are ok, it does not make a difference. western allies said the bank is not experienced on flows following first republic.

pac west, says the bank has not experienced out of the ordinary deposit sales. tom: to the two of you, looking at flows on bloomberg, nobody is framing a 6% money market fund or a 5.8%. let's not be inflammatory, but before we get to the sub 10-year yield a year out, and we move higher in yield, moving the deposits ever more the highest rate? lisa a: on one hand, deposits may be relatively stable right now, but on the other, there has been a drip of deposits out of rate -- of banks. raising questions about deposits that grew up in an era of 0% rates. it is a time when $5.8 billion has gone into money market funds over the past few weeks which compares to $500 billion after lehman's collapse. that is the opposite of comparison. tom: on a cd friday afternoon,

we get more data today. there is more bank lending data. jonathan: you have to work out what the underlying issue is. is it about deposits? there are other things two -- too but let's go with deposits. is it fear or is it great? is it fear because we are worried about return of capital so you are taking your money to another institution, or is it ultimately greed? to your point, maybe funds for .5% or higher. who knows where this is going. but they cannot keep the money in house. lisa a: the problem with a banking novel is because it is hard to keep in mind. this question of they live and they die on reputation. their ability to profit on that, if they restrict the number of loans they extend, this tightens credit conditions.

jonathan: it is important for policy. if it is fear, you can address it with a new fdic limits because then you know your money is safe. if it is green, it is just about concerns and is not matter what the limit is. tom: it is more complex. senator warren's quotes to bloomberg in the last 24 hours talks about the greed out there. michael spence's 2010 essay on this was textbook "the greed never goes away." also is our senior technology expert that is truly a expert on the cloud. from the clouds bloomberg intelligence, expert on innovation. i don't want you to do a self site walk-through on apple. i want you to talk about disruption, innovation, and the sweat of new products at apple with the legacy you and i remember from the massive failure of lisa and newton.

not lisa abramowicz. lisa the computer. are they setting themselves up for a flop? >> i do not think any of these companies are setting themselves up for a flop. the companies have massive amounts of data and a lot of engineers going through it. you see some of these ai enabled applications show up whether that is in pictures, voice command, or when you are writing an email. these companies are working hard to make for the next level of products are far more intuitive than early ones. tom: what is a mixed reality headset? has our apple expert called up and said i am going to look around like lisa does when she is maximum bramo? am i going to be looking around with my reality headset? >> i do not think so. i do not think that is a game changer from a product point of view. it is like an airpods.

from a mixed reality, we do not think it will be that big. but it will truly open a new universe of applications, and a new ecosystem that over a ten-year period will actually generate good amounts of cash flow, services revenue for apple. lisa a: is it a good thing or bad thing that the iphone is the bedrock of the entirety of apple's business model? >> i don't think it is bad. to be honest, i look back and think about apple more like a good color that is a very u.s.-based company going all over the world. iphone is the linchpin. i do not own the apple watch but i do own airpods. airpods have a high attachment rate. but maybe down the road, if the apple watch has more features, i may get one. if you are in the ecosystem, you will buy products around the ecosystem. lisa a: waited you make of the

emphasis of india and switching to india as they continue to manufacture the watches and phones? >> when you come back from india, you talk about india for several weeks. i do that quite often. [laughter] tim talks about that a lot. it generates less than 4% of revenue from india. it is a massive opportunity. on a population site, 9% of people in india do not even qualify for an apple product. the apple product share is less than 5%. as they become more rich, they are bound to get more expensive products. ovi and h, mercedes-benz, all these products are doing very good in india. i think apple will too over time. jonathan: is this a growth company anymore? >> it depends on what you think. and banks are loading up, you do not want to worry about what is happening on monday. when you have a company like

apple, you will not be worried about it. next year, the new iphone comes in and that bounces back to eight to 10%. 8% to three perform a set -- strippers or for percent is not shabby for any large company. you do not see that very act -- very often. jonathan: you are one of the very best. anurag rana on apple. apple is positive this morning. of 52.6%. big waiter on one of these investments. future is 0.7% as we count down to payrolls. tom: we also count down to naples waking up this morning. explain the apple videos we saw last night of a busters celebration in naples, italy. jonathan: they have come close over the last few years but for the first time in 33 years, we have to go back to the 89, 90 sees.

diego marathoner was a god and still is in the city even after his passing. just amazing. terrible defense from my beloved. did not stand up and try to defend the title at all. they are doing really badly. [laughter] tom: this is important. i need to get a flavor of italian football. the only way to do this is next wednesday. jonathan: i am very excited. the family is from the south and into that supporting a club from the north by over -- enter send the romans of a team from the south winning the italian league and getting one over in the clubs and events. this is really meaningful stuck to the city of naples. congratulations not only -- n apoli. her payrolls report is 40 minutes away. jeff rosenberg is with us to bring some of this down.

looking forward to that in the next hour.

so many people are overweight now and asking themselves, "why can't i lose weight?" for most, the reason is insulin resistance, and they don't even know they have it. conventional starvation diets don't address insulin resistance. that's why they don't work. now, there's golo. golo helps with insulin resistance, getting rid of sugar cravings, helps control stress and emotional eating, and losing weight. go to golo.com and see how golo can change your life. that's g-o-l-o.com.

>> i think we are going to have more stress exhibited in -- across the markets in the coming month. >> we have all the gradients for a new growth scare.

>> are expecting a version of credit tightening and crunch to come through. >> we think liquidity is the big issue. >> my big fear is we are starting to turn from an interest rate risk a story to a credit risk story. announcer: this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning. jonathan ferro, lisa abramowicz, and tom keene. we are going to step away from the new zealand banking crisis. in this hour, the labor economy of the united states of america. you mentioned iowa earlier, under 3% of unemployment rate. jonathan: 2.8%. for the country, it is .5%. we are looking for that to go up to three point 6% -- 3.6%.

for this bond markets, this data has been pushed around. it is the bank stocks that have pushed around the treasury markets. that has been the story for the broader market. pac west, western alliance, names would never talk about a couple years ago. they have been kicking around the two year and rate cut expectations. tom: we will do the data check in a moment. to the whisper number of what we are going to see in 28 minutes is of goldman sachs and others nudging up a bit off adp, where they really do not have confidence. jonathan: on monday, the market was kicked around by data. it is the component of the ism manufacturing number monday that moved the market together with a bunch of data assurance. if you get a sign of price pressure from wages, which i think is what you are leaning to lisa, that could be the thing that really nice the

conversation around sticky inflation. lisa a: otherwise, are we just looking at a snooze fest and though it is not really because it is getting real information? this is data dependency. how much are we looking at data that people are ignoring to pick the data -- the narrative they want to pick? six months ago, we talked about the most important fed meeting and the most important jobs report. no one is talking like that anymore. tom: glassman at jp morgan is hugely optimistic on the resiliency of the american consumer. the fed is demanding, what, a 4% unemployment rate? 4.2% unemployment rate? jonathan: 4.5%. tom: it is a fully employed america. jonathan: what would it take to get unemployment higher? the projection is 4.5%.

a lot of people have doubts about this happening. tom: i am with senator warren. why are we battling to have unemployment higher? american politics is a fine election, a free beer, and i will give you a job. jonathan: this conversation is so tense with unemployment at 3.5%. can you imagine what it would look like when unemployment starts climbing in a material way? tom: michael mckee is in washington, right? data. i will go with 3.5 percent. jonathan: all over the place. somewhere in between the moment at three point 83 on the 10-year yield. back a little higher at 3.40. the equity markets a lit up by 0.75%, supported by apple. apple is up 2.5%. tom: 41 hundred folks, spx is a

good year. please stay with us. nadia level leaves of, senior equity strategist at u.s. global. how separate is it as we go to the bond market jobs report? >> i think the equity markets has a fair amount of optimism priced in. a lot has to do with the larger market really powering into spx as you alluded to. i think this goes to the tightening credit as companies are more directly insulated. we still remain cautious on the outlook for the equity market. we think this is some of the market internals including the flows data. the bearish signal will suggest some systematic buying we have been seeing in the markets just is not there anymore. you have earnest optimism star more than fully priced in. we think this markets remains

fragile and vulnerable. we are looking for another 5% or so. jonathan: historically, do you buy or sell on the last hike? >> historically, you buy the last hike because normally you will see the market rally from there. but this time may be different. he set is different. you have inflation still high, and concerns within the banking system and fragility. we think the outcome is going to be different this time and the economy is going too slow which will pressure earnings. lisa a: do you care about the labor market report we are about to get? [laughter] >> yes, we care if it is negative. but it is likely to come in line with expectations or to the upside of what we have seen this time. think it is just less of a focus right now. the focus is going to be on a senior officer survey next month.

but we are also going to be close to watching a small business survey next week because we want to get an indication of what small businesses are experiencing, because we know they are the ones seem larger labor demand and slowdowns in expectations going forward. lisa a: is this about the fear that has been interviewed in the equity market? there is a concept that there is pernicious credit tightening do not see yet that has a lag effect and will drive all action in the coming months. and everything we see right now could be a head fake. is that your thesis? >> we have been pricing in tightening credit lending standards as to why we expected negative earnings growth this because it is a strong correlation. we think the fed will do further tightening. the reality is the banking system is safe and sound for depositors but there still may be some concerns around profitability that it is not safe and sound for profitability for investors.

you will see thanks pullback and that will lead to lower loan growth. therefore, a slower economic demand going forward. >> you would not buy the banks right now? >> we are still underweight on banks. we have been for quite some time. you think you have a negative feedback loop within the system. you have shortening pressure, prices are falling, leading to confidence being shaken and additional outflows. it is more about deposit outflows and higher deposit costs. it is also about lower loan growth and capital returns. you have the earnings risk and the cyclical risk. it does not mean it is not investable, but we think it is still too early and you want to focus on the higher quality makes that have higher cte one capital ratios that are already accounting market in some available sell securities. jonathan: what is the headline

you would need to see across the bloomberg terminal, a policy shift, that would encourage you to buy the saints? >> you want to see in terms of private market really stepped up. but also, some deals that are not federally assisted. you have seen all the deals so far in the last three banks have been, as a result of receivership, and better deals. you want to start to see this not happen. you also want to see an explicit guarantee of deposits to help because stabilization. jonathan: always really thoughtful. nadia lovell. 22 minutes from now, 21 minutes away went into the jobs numbers. tom: as lisa mentioned, snooze fest is maybe a little harsh but you are right. we sort of slipped into this with all the distractions of the week including the fed show. i look at this and i have to say, are we setting ourselves

up? remember when we came out and it was going to be 100 and blah, blah, blah? [laughter] jonathan: i think that is an impression of me. tom: i do not have any guesses of what we are going to see. maybe we are in for a surprise. lisa a: to me, traders did not respond. they are not respected -- not expected to respond to this report and they did not respond to the fed meeting. to me, this highlights the fear of banking stress overcoming everything else. jonathan: haven't we got a strong indication of what this will look like already? lisa a: yes which will not move markets either, so where are we? tom: can we digress? jonathan: yes, not that you need anyone's permission. tom: john, lisa, and i were

curing up over the celebration of our team and a wonderful child. well mannered, pre-tuition, preschool. it is a birthday pineapple. pineapple is one. congratulations to rachel. all celebrating that pineapple is one years old today. $20,400 for preschool tuition in manhattan. jonathan: is actually the baby's name? tom: yes. jonathan: why do i think he is getting us into trouble here? lisa a: her name is not pineapple. tom: $20,400 for preschool tuition is insane. that is how much it costs at a manhattan school which is pineapples destiny. jonathan: you should share what you are about to do in the future. tom: no, this is important.

people ask, is this rehearsed? lisa a: to be clear, nobody asks whether this is rehearsed. it is quite clear everyone knows it is not. tom: that is what we did from the start with ken prewitt and -- bring up the photo of pineapple again as we go into jobs day. jonathan: i just got a message from a bloomberg subscriber, take that away from me. at the birthday to anyone celebrating a birthday right now. coming up, before the fed governor, your payroll report is 20 minutes away. lisa m: we all want to know what is in the tank. keeping you up-to-date with news from around the world. with the first word, i am lisa mateo. a few minutes from now, the u.s. jobs report may show resilience of the labor market. the report is expected to show employers added 185 thousand

jobs and the unemployment report picked up 3.6%. only 0.2 percent of a percentage point. coming up 15 minutes from now. u.s. regulators planned to make biggest banks pay most of the bill when it comes to paying the government deposit insurance fund. bloomberg learned small lenders will not have to kick in extra money. the fund was depleted by the failures of senator vale. cuban will name the air force's top general to become part of the joint chief of staff. general charles brown, the air force chief of staff, would become only the second black person to serve as chairman. the cofounder of oaktree capital, howard marks, will reportedly undergo surgery for throat cancer. according to the financial times, he wrote to his investors that the type he has is curable and he hopes to return to work

around midsummer. oaktree had around $172 billion of assets under management at the end of march. under brothers discovery reported a surprise profit in tb. they saw their legacy cable never continue to lose advertising in viewers. the company will relaunch the streaming service as facts on may 23. global news, 24 hours a day, on-air and on "bloomberg quicktake", powered by more than 2700 different journalists and analysts in over 120 countries. i am lisa mateo. this is bloomberg. ♪

the first time your sales reached 100k with godaddy was also the first time your profits left you speechless. at the counter or on the go, save 20% with the lowest transaction fees and keep more of what you make. start saving today at godaddy.com

>> if you get a weaker number, i think the market is already under a recession alert. that starts to flash a lot more if the data is weaker. i would highlight anything above

85,000 or 90,000 is above trend. it tells you how difficult the situation is for the fed and a market hoping for fed relief, for a quick fed cut that is not happening. jonathan: priya misra joining us from td in the last hour. looking ahead to payrolls, looking for a number that may look like 180 5000. that is the median estimate in our survey for the month of april. there is the price action on the s&p 500. we have been positive all morning. we are positive by 0.7%. helped out by apple which is trading up by 2.4%. bond market yields are higher by two basis points. on the 10 year up to basis points. at 3.39. tom: we are colored by some form

of banking battle crisis or however you want to phrase it. as we do at "bloomberg surveillance", we try to ring you people measured and deeply experienced. today, joining us is the nation's expert on regulation. randall crossan are -- krosner out of brown. an incredibly distinguished banking system. he is at the bush school of chicago and a former fed governor. i have been dying to talk to you about this. how do we extricate ourselves from a mess which was based on the rate of change of interest rates instituted by jerome powell? randy: we have to look really carefully at what is going on at the individual bank balance sheets. some issues have been really obviously there. there are even some medium-sized

banks that touted how brilliant they were by buying long-term securities which allowed them to earn extra and raise dividends. some of these have not survived and not done so well going forward. that is the next step. the immediate next step is looking carefully where the issues are and identifying the ones that are vulnerable and the ones that are not. right now, there seems to be a lot of the spreading of concerns across a lot of institutions. some of which are stronger and weaker. focus on the one star week, deal with them and move on. tom: should be allowed for combinations of 4000 banks? is this enough of a shock to finally move us away from the -- thought paranoia, but the debate wrapped around andrew jackson? randy: until recently, we had 15,000 banks and then we came down to 5000 banks. the u.s. is an outlier of having

that many banks. the small and medium-sized banks do something different than the large banks. a lots of the local commercial real estate lending -- the big banks do not have much of an appetite for that. they do not seem to be too eager to get to that. it is value in having variety across institutions. we need exactly 5000? i am not sure. lisa a: we are about 10 minutes away from the latest labor market report. we are talking about banks and that is significant when we are looking past this number and trying to figure out what the credit number is across this nation. do you think it is dangerous to discount the strength of the labor market for potential sentiment in the banking sector? randy: it is important to be aware of what is going on. because the 4900 of the 5000 banks we have are very important for small and medium-size business.

a lots of jobs are generated there. so there is a closer link between the two. but obviously, just as this will be extraordinarily important for thinking about where the fed is going to be going. although it is highly unlikely the hunting unless there is a crisis that occurs by table tell you something about the likely path of elation and where the fed is going. lisa a: what is the crisis that would cause a response like that? what is the level, especially at the labor market is as strong as its acted to be? randy: this could come from different sources. one could be geopolitical. we are in a really difficult you political world. other it is ukraine, china, the middle east, or africa. cold wars, hot wars, or wars that might be building even further. that is one where you. -- worry.

and if there is major financial turmoil, the fed will respond, but it has to be major. not just a couple banks here and there. the fed was willing to raise rates despite the tumult over the last couple months. something like what we are seeing now is not enough to get the fed to move. tom: you are the distillate from george stigler. and to what he did which was the capture of the system and regulation. in interwar and is fired up. james dimon is a piñata as he takes out banks essentially. half the rich guys capture the -- half the rich guys capture the stigma that george stigler study? randy: we can look into how to apply george's insights. obviously, special interests do play a role.

but also, sometimes positive or negative. we also see that it was the least cost regular solution -- least cost resolution for j.p. morgan to take over first republic. corporation improvement act of 1991 requires the fdic take the lowest cost bid. it had no choice in that and jpmorgan chase was able to make the lowest cost bid. there are pluses and minuses. i think we need to think about how we want to reshape the system going forward. that's my mean me not just changing regulation and also some laws. that would be up for congress and senator warren to change. jonathan: we are seven minutes away from the payrolls report. the estimate is 185,000. lucky to have randy kroszner with us. he will be with us as we break down the number in around seven

minutes time. michael mckee is in washington, d.c. when was the last time payrolls came in below estimates? michael: about 13 months ago actually. in march of 2022. which, coincidentally, was when the fed began to raise interest rates. it has been a long string. we will see if that continues. the whisper in the markets is actually 190,000, so wall street is leaning toward another beat that way. it does, it may put paint to the way that we are going to see a fed cut in july. to get to 4.5% or 4% by the end of the year, we need to see big negative numbers. tom: how did adp and claims adjust the whisper and guesstimates of the moment?

michael: adp maybe has influence to the whisper number but it has not influenced too much the overall number. some people did recalibrate their forecast that we have been in the 180,000 to 185,000 forecast for the last several weeks. jonathan: thank you. of course, michael mckee knew the answer to that. the jobs report was released in april and we have been looking for 490,000 but we got 431. that was the last time payrolls became -- came in below estimates on the day. lisa a: it is phenomenal that people have underestimated the economy to this degree. some people say even if we overestimate this time, the lag effect will take care of that. tom: i looked back to where we were at unemployment at the peak and it was 150 million. we are back to that. now we have immigration and a larger economy over the last three or four years.

but we have essentially recovered in a general way to where we were in 2019. jonathan: it has taken this long to get back to normal, whatever normal is. tom: that c had you have to make. there are a lots of moving parts. what a privilege to have governor crosser --randy kroszner. jonathan: going into payrolls, 180 5000 is the estimate. the previous number was 236,000. the actual number drops next. ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) ( ♪♪ ) constant contact delivers the marketing tools

your small business needs to keep up, excel, and grow. constant contact. helping the small stand tall. this is ge aerospace, advancing flight for future generations. ♪ welcome to a new era of flight.

jonathan: the payrolls report is literally seconds away. in our survey, the estimate is 185,000. the number drops in a few seconds. session highs positive 0.7% on the s&p. bond yields are a little high, up two or three basis points. here is job -- for the jobs report, here is michael mckee. mike: we do it again. you are the winner for the 13th month in a row. jobs come in above what was forecast in the bloomberg survey.

253,000. the estimate was 185,000. even more significant, 3.4% unemployment. the unemployment rate drops by another tent. we have a revision of a hundred 49,000 jobs subtracted from february and march so take that out of the 253,000 in terms of total number of jobs and this does show a little more we miss in the job market than we had seen but on an initial report basis, very strong. manufacturing jobs up. manufacturing not in as bad a shape as anticipated. average hourly earnings, we are up half a percent on the month which was much stronger than the 0.3% we saw last month. that pushes the number of from 4.2 to four point 4%. the average weekly hours are

unchanged. the labor force participation rate is unchanged at 62.6%. i am sure we have some reaction to this while i dig into where the jobs were created. jonathan: it will take a guess. yields higher by 10 basis points on the front end, 3.90 on the two-year yield. yields of, dollars stronger. guess where it is? a break of 110. 1.09. -0.2% pair. s&p still positive, 0.6%. we still have not had a miss on the jobs reports going all the way back to the march report of april last year. wages higher -- hotter, unemployment lower. tom: i will channel joe biden and say that 3.4% -- i have not even had time to go below the

data. i am looking at the state numbers. the answer here is 3.4% is miles from where the chairman of the fed wants to be. lisa a: if you are wondering why the markets is not reacting more because 10 basis points of a move is basically little change these days, take a look at the revision. the downward revision in the prior month's. this is the question. are we looking at something that is moving in a way where you can confirm your narrative? which is a reason perhaps by markets are not moving as much as you would expect report -- as you would expect. jonathan: 3.4%. that is not the report chairman powell thought they would be looking at months ago when they went from zero. tom: can we just have a moment of silence. we all have our names that we know how far we from recession? this is a reelection

unemployment report for joe biden. this is really good math. jonathan: i don't want to get over my skis 18 months out. i have no idea what things look like next week in financial system, never mind next year in the economy. but we have gone from zero on fed funds and unemployment is still at 3.4%. the fed is projecting something around 3.5% by year end. at the moment, michael mckee, you are not seeing this developed at all. on the headline, can you jump in on the slowing jobs growth? whether the trend is there for us to get our hands on? mike: there does not appear to be a trend in there. we seem to be flattening out because we are looking at the same numbers over the last couple months. we had 253,000 and we had basically 236% -- 236,000 last

month. we are looking at kind of a flat number but it is still the same number out the gate. even 146 thousand when you go back to the revised march number. that would be stronger than we need to of -- to observe all the workers coming into the labor force. take a look at the unemployment report too. another big bug for jobs. a number of people employed grew by 139,000, while the number of unemployed fell by 182,000. the labor force fell by 43,000. and a lot of that were people dropping out of the labor force. but in both the establishment and the household survey, a big gain in employment and unemployment calling. -- falling. it is still a very strong labor market. but to give lisa her do, we are

seeing a drop in the average for all the categories added. leisure and hospitality was of 31,000, but they had been rising -- up 31,000, but they had been rising at a rate of 73,000 over the prior six months. we are seeing a drop in the additions but a broader group of employment categories at jobs. jonathan: shout out to the team at goldman. the team for something in or around 250. we got 253. headline, two hundred 53. the estimate was 185. lisa right to estimate the revisions are fantastic. unemployment is up to 3.4%. wages coming hot month over month. 0.5% year-over-year. 4.4%. yields at the front and by eight

basis points 3.87. the banks have been in the driving seat for the bond market this week. to finish on foreign exchange, the euro is negative a quarter of 1%. coming up, anastasia amoroso, michael collins, reader of blackrock, dan ives. tom: the 10-year real advance as well. the three-month averages here are published in the report and go from 500 24,000 to 320,000 to 200 90,000 to 222,000. there is a trend of the three-month moving average. i am acting very phd at the eccles building. this is a very gradual trend to chairman -- to what chairman powell wants to get to. does he have time to wait for the trend to play out to

something that is a lower statistic? randy: you nailed it. that is the challenge. it is moving in the direction they want it to move finally. it has taken a long time to get there. as i mentioned before, what they are hoping for is immaculate disinflation where you slowly begin the labor market is to get the -- the labor markets. the hawks number on -- hot number on wages is not consistent with that. we are going to get another labor market report before the fed makes its decision and were inflation data coming in. as i said on the program before, the fed will not quit until the labor market quits. this is not a quitting labor market in this data. lisa a: how do you understand the average hourly earnings and how much they have gone up?

given the fact people were saying they were starting to see a process where workers are losing power they gained in the aftermath of the pandemic. does this fly in the face of that? and perhaps we are in different environments with a smaller workforce and a greater thrust to labor's power? randy: labor force participation is key to that. that is one of the challenges the fed has had. you have lower labor force participation, demand being very strong, some of that being from fiscal stimulus from before, but continuing with fairly strong demand. and tight labor market means one thing, which is we are going to go up. the hope is they will not go up quite as fast going forward. but that is really, so far, the data is not telling us that. tom: randy kroszner, thank you

so much, particularly on your comments of our troubled banks. he is at the booth school in chicago. what a joy & of covid going away. running as is jeffrey rosenberg of blackrock. of course great to see you. this is our work from office. it is great to have here. you are being here, is it a symbol of this job economy and may be troubled banking crisis that we are somehow getting back to normal? >> we are getting back to normal in terms of the covid part. you guys have already covered that this is not getting back to the slowing the bond market is expecting where the fed is hoping for. michael mckee says something at the beginning that i want to echo. we are far away from what the job market reports need to start to look like to begin to even

get close to what the fed is forecasting. tom: we need to get down to 120, 100 or even 95. but what is the unemployment rate that makes chairman powell sit up straight? >> one that starts to rise. tom: a vector, not so much the level. >> a change that has to start showing the tightness of the labor market -- or the tightness of the labor market beginning to ease. and to getting increases in the unemployment rate. he said in the press conference that part of what the price to pay for achieving success on inflation is a rain of growth for a small period of time below trend. that is what it will start to look like in the labor report in rising unemployment. nothing really points to any of that. lisa a: do you think the market

is overpricing the bogeyman to something that will cause this to hold in its tracks and reverse in a meaningful way? >> let's separate the market pricing of what is a boogie man? i think the market worries about tail risk, shock events, crises. the banking sector crisis we saw in march and an echo rebound we have seen this week is that kind of thing. that is different than fundamental economic performance. that is not so much a tail risk but more about the trajectory. the two can be linked because if you have a crisis, that feeds back into confidence. lisa a: this creates real issue and i am wondering why we are not seeing this in longer-term treasury yields. if you have a push, pull -- a push-poll, isn't the risk of inflation remaining high for a longer period of time that but reader and not being priced in?

>> the pricing in of this should be the term premium. there should be a premium for holding longer data maturities because you have more inflation risk and inflation uncertainty. the market is really wetted to this view that we know very top of the back down to a pre-covid 2% inflation rate. today's data is another piece of evidence that says that is not what we are really seeing in the economy. the disconnect between what the fed has been saying, powell said earlier this week in terms of cautionary tale, relative to what you have seen in the yield curve into inversion is very much still the tension we are dealing with. tom: you had ellen moser, a good friend, who we lost late last year at 87 years old. they hark into what some people are looking at which is m2 exploding with the biting stimulus and coming out -- the

president biden stimulus and coming out. for blackrock, how disruptive is the huge variability of m2, and almost like thick oil within the system? the engine oil is getting thicker and thicker, isn't it? >> it is a huge deal in terms of the structure of interest rates and monetary policy. we went from a restricted reserve system to an excess reserve system, a plentiful reserve system. you see this in the banking statistics in deposit ratios. part of the increase in uninsured deposits that is part of the source we saw is because he flooded the system with so much liquidity. we are seeing there are some unintended consequences. the role of rrp in creating competitiveness to deposits is all part of the newness of what

does it mean to operate with balance sheets that went from 6% gdp to 35% of gdp. a lot of this we just do not know how it works. tom: what jeff rosenberg is doing is a bond portfolio from 60,000 feet. what is your conviction three years out thing at a holistic blackrock bond world? >> the first conviction, three years out, the big changes we have reset the starting level of yield. when you think about bonds, they are about income. when there was no income, it was hard to hold onto bonds. that the restoration and the fed getting off zero interest rates and a focus on inflation, the starting point is now 5% or 5.25% interest rate yields. this recess the bond market and is why you have seen a loss of flows and interest rates come back to bonds. we had a several year long

period of zero interest rates. we talked about the lack of yield. so you are seeing a restoration of bonds because -- tom: i am going to steal that world. restoration of bonds. lisa a: the issue is we are looking at the practicality of it which is getting yield, and the practicality of the data, which is the economy is still strong. the two ideas are in conflict with each other where we either have to see the fed stepped in more aggressively to bring things to where they want, where you have to see something change in terms of peoples assumptions of longer-term inflation rate. what data are you looking at if it is not the labor market report or what the fed said this week? this does not seem to matter anymore as people hunkered down with their narratives. >> let's come back to your data

point of average hourly earnings and why this one is a hard one to anchor on. it is so subjective. it is so sensitive to the next shift. part of what you saw in internals of today's labor report is a little less boost for leisure, hospitality, and fred which tend to be lower -- and less spread which tend to be lower income changes. the mixed shift which helps to boost is not giving us a big picture of wage inflation. last week cci is a much better -- eci is a much better measure and atlanta is a much better measure. next week, we look at housing as a mapping to the labor market and be more stable long-run indicator of where is inflation owing to settle down? no one doubts peak inflation has

occurred and inflation is declining, the shelter piece will decline and push everything down. it is do we get to 2% or do we maybe get to 3% and because of this dynamic, have a harder time in the debate shifts to the cost of getting to 2% versus 3% versus the benefits. lisa a: how hard is it to get to recession with a labor market like we just got? >> that is a 3.4% on the unemployment rate. yes, it is a lagging indicator. but what powell said earlier this week, you have not seen that much slowing. you look at earnings and what the companies are saying and credit markets are saying. high yield spreads, away from the banking sector. this is a very robust economies of the tightening has yet to show up. we expect it but it has not happened. tom: we said this eight months

ago too. lisa a: that is the shocking thing. it is a serious thing especially given the faster pace of tightening. tom: jeff, thank you so much particularly for those thoughts. features of, 34% on at px. dow up to 28. the vix shows you where the equity markets a's. the two-year yield is up seven basis points. ira jersey joins us, chief u.s. rate strategist for bloomberg intelligence. what a joint team going to write about to get ready on the bloomberg terminal monday morning? forget about the jobs report. what are you going to write about within this crazy week to refrain monday morning? ivory: i am writing up -- ira: i am writing about what jeff rosenberg was talking about with

the federal reserve increasing interest rates which makes money market mutual friends -- funds even more interesting for investors to move money out of banks that have no deposit rates up to money funds. that could have knock on effects to a lot of different pieces tom: of the market structure. tom:tom: the btm screen for our listeners and viewers on a more general basis, what is the thing to watch if money market funds nudge toward 6%? i wrote: i would be looking at -- ira: when you get a data report like this, there is a nonzero chance for a growing chance that the federal reserve will feel they have to act again in order to get inflation lower. we do not think that is likely to happen. i think what chairman powell needs to do in order to kind of fulfill both of his mandates and

also make sure there is some semblance of financial stability is to convince the market they will not be cutting this year. he keeps saying it but the market does not believe him. if you think of the idea that the federal reserve could convince markets they will not be cutting rates for a year, that is almost like building in two more hikes because the market is already pricing for one late this year and early 2024 with interest rate cuts. a lack of cuts is as good as a hike at this point in the cycle. it will take a lot of jawboning for the center and others to convince the markets that is the bigger policy -- going to bring bigger policy back. lisa a: the attractiveness of the short term paper and the idea you could get yield put into bonds, and this idea that money market funds attracted $580 billion over the past 10 weeks is more than what we saw

in the aftermath of the lehman crisis. from your perspective, have we hit the tipping point where flows start to accelerate and matter in a more significant way than they did six months ago and people had not fully looking up to the yields available? ira: i don't know that they accelerate by think they can continue. that is not great for some banks unless they increase their deposit rate and this means net interest rates can change pretty significantly. importantly, which goes to something jeff was talking about, it is almost impossible -- it would be right now impossible for money market funds to accept all these flows without t-bill yields being lower than they are. 1% or 1.5% lower than where they are today. except the money funds can put their money at the fed or keith facility, at the reverse repo facility. if that did not exist, the money market structure would be different than it is today.

there is a challenge the fed has in trying to keep interest rates high but at the same time in showing financial instability. i am not sure they are doing a good job with this because we have unintended consequences of what the federal reserve past policy is doing to policy today. the fed has to do more work and think about how their future actions will affect the financial sector as a whole. tom: ira jersey is a grizzled pro in what he just said about the conundrum of the fed and stuff i do not understand. there is no other topic. talking about the punch bowl, windows the punch bowl get taken away from a 5% yield and normalize back in a simplistic way? ira jersey just address this. what do they do this weekend on it? lisa a: have you been surprised

we have not seen even work rackspace on how quickly the fed race race and how -- not seen raise rates given how quickly the fed raised rates? ira: systemically important banks benefited from the relatively new facilities like interest being paid on reserves. if you hurl -- hold a law of reserves like important banks do, they are getting paid over 5% for holding those reserves. at the same time, even with an inverted curve, it is not affecting the interest margins but helping their net interest margins. when you look at aggregate data, it makes the banking sector look ok but there is a distributional problem. the big banks are getting bigger and benefiting from these but the smaller and more regional banks are not.

that is the difference in this crisis versus a 2007-2008. tom: thank you so much. you can rehear this on-duty where we are building out the franchise. futures of 32. a 4100 level on spx which means it is time to speak to gina martin adams about a fully employed america. 3.4% keeps consumption going. our -- our -- are consumer stocks attractive? gina: consumer discretionary actually did popped toward the top of the car on the idea that inflation is slowing. not necessarily on the idea of consumer will accelerate their ending pays or that revenue growth will remain incredibly strong but more on the idea that earnings last year were weakened materially by high inflation, high costs, and a troubled inventory cycle.

now a lot of those risks will clear into 2023 which will allow for consumer discretionary stocks in the s&p 500 that is better on an earnings basis. it is less about demand which anyone reasonable would suggest as we move forward and as we absorb the higher costs of funds and the higher cost of borrowing that consumer growth story will slow a little. but it is really about margins. we have been talking about this ad nausea the last two years. by will suggest this is a story of inflation impacting the equity market. it is not yet about growth. the equity market will trade on the inflation strain more than anything. lisa a: we are talking about job creation and the fact it has come in for a consecutive month higher than the expert patient on wall street. can you compare the reports we hear on layoffs with the job creation machine that just keeps

on going? gina: it is really about industry and sector. you hear about layoffs but over the course of the last few months, they have been very concentrated in technology and technology adjacent spaces. these are the areas of robust growth in jobs and the areas where we were going to spend in perpetuity. we were becoming incredibly more independent to really power ongoing economic conditions -- conditions and they over hired. they have now cut labor in line with a more realistic demand profile from the economy. i think this is something that maybe has gotten lost in the consensus view on what has really happened in the labor market. it has not been a widespread job loss but very concentrated and reflects the period we just got out of. tom: thank you.

gina martin adams of bloomberg intelligence. back to back on bonds and equities. i cannot say enough about what ira jersey is doing on short-term paper and gina martin adams out with the portfolio on paper. a really fancy screen on surge of value at a time when apple gross is well. once a week that we survived. [laughter] lisa a: the day is still young. the focus this week is on banking stress even after the march rescues and all the potential policy reis wants really highlights people's focus is not necessarily on the fundamental strength but somewhere else. it is noticeable there is not more of a poppy -- more of a pop in yields. this was very much a focus on the revisions. if you bring this done and average it out. >> tom: this timeline does not help anyone at the fed senator

warren. it is a gradual shift of a fully employed america. lisa a: it was interesting to hear jeff talk about the wage figure and how that was also somewhat distorted by the mix and the distribution. the fact there is no clarity in how quickly the steam is being taken out of the economy is causing angst. tom: two program announcements as we go into the weekend. i am going to be looking at foreign affairs magazine. we have a surveillance correction. it is not pineapple. it is laney. happy birthday. months ago, jonathan ferro will be in conversation with mohamed el-erian and rick zreider. i am going to wear a cheese

thing and an aaron rodgers jersey. mohamed el-erian, next. ♪ jonathan: good morning. were equity markets positive 0.7%. the countdown to the open starts right now. announcer: everything you need tothis is "bloomberg: the open," with jonathan ferro. jonathan: live from new york. the latest payrolls report coming in hot. regional banks looking to get to the weekend and the iphone helping apple top. we begin with the big is