>> if you look at the economic data, it keeps coming in, showing a tight labor market. >> we are seeing the economy is slowing some, but it is not falling off the cliff. >> the equity market is focus on earnings. >> we are waiting for the labor market to catch a cool so we can stop this acceleration of wages. >> can the consumer continue to live beyond means? announcer: this is bloomberg "surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning, everyone.

it is a jobs day in america. you think we are sleeping into a holiday weekend? no. jonathan ferro off today. lisa abramowicz off today. paul sweeney off today. i just begged for someone to come in. we are thrilled that the host of the real yield joints today, katie graham filled. >> this is a good summer friday. tom: the inflation report coming before the fed meeting. it is wage growth or lack thereof day. >> you think jobs feet into wages, feet into prices, and obviously that is what the fed will be focused on. they are expecting pretty good news today if you look at the

economic forecast for that waste growth. -- wage growth. tom: our team started working in middle august. we have a great lineup coming up. looking forward to intense conversation, framing of september, firming up into the end of the year, and the ecb meeting in september. two important guests. sarah house joins us. ellen zentner will join us. great to talk to seth carpenter yesterday i believe it was. former federal reserve governor randall kroszner scheduled to be with us. i will start the data check with jeff rosenberg with a real yield 1.87 comes back from the disinflation tennessee we have seen the last 24 hours -- tendencies we have seen the last 24 hours.

now the beginning of september. the bears humbled and in retreat. the bull market 13.49. i have to quote bitcoin. i have not quoted bitcoin since nixon was president. 26,000 on bitcoin. two year yield 4.86% per year -- two year yield 4.86%. two hours away the jobs report. oil, i want to point this out, it is grinding higher but maybe it got a lift to it. 87.86 on brent crude. a 90 print would be game

changing. even west texas intermediate, $84 a barrel. jon ferro looks at euro, 1.0 847, as a dynamic year of what is going on in europe versus what is going on here. katie: it is interesting to see europe and u.s. facing different problems. you think about those two central banks moving in lockstep the past three years but now it feels like we're getting to the point in the cycle where we could see divergence, potentially as soon as this month's as it is september 1. tom: forget to steve whiting, china, it is really been something. -- before we get to steve whiting, china, it is really been something. there is not one big announcement from china but lots of little drips. a move to boost the currency to give protection.

they got it where they are now at seven point 26. but certainly into this american holiday weekend, all eyes on the economic challenges of china. we are really humbled by the quality of the guests this morning. you think everybody would be out at their 8000 square feet in the hamptons. steve whiting is not. he joins us now. the greater gdp numbers into the profits of america. is america flat on their back? it seems to be the great missed call of the year. america was going to do poorly, recession, all of that. i know you do not believe in atlanta gdp. steven: the economy will grow a little bit more this year then ended last year in real terms but if you think about employment, if you go to the july employment report, 180 7000 jobs.

the what we had july of 2022 was just below 600,000 jobs. input and output in the economy are growing at different pace and going in different directions. we are likely to firm up cyclical businesses. over the course of next year and 22025, i think employment continues to slow. the fed will get its way with the labor market. they are set on having an higher unemployment rate read we just lost 2.6 million job openings the last 12 months. we have been able to continue to grow overall employment. but again, the business output and profits, which were down 6% through q2, we confirmed that up with steady headcount. that is where we are headed. katie: of -- on this jobs day, i want to know what the fed would look at at of 8:30, within the data, the two studies. what will matter for jerome

powell? steven: it is really a single indicator but if labor demand continues to grow faster than labor supply. then they are unhappy and vice versa. when they take a look at an unemployment rate in the mid- 30's, they want to see the balance of labor demand is the direction of travel. i think many will take a look and say, the economy cannot produce 190,000 jobs every month. we do not have a working age population that would do that, but the fact that we have come down, we slowing pace this much, and if it continues to move in this direction, they're going to be less concerned about whether or not monetary policy is tightened enough. i think we will head the other direction is in the coming year. tom: you mentioned that of course, we have seen job openings really cool down from m

some of the big jolts numbers we were getting, but when do we see what the fed wants to achieve in the unemployment rate? steve: it is difficult to know whether people on the sidelines will continue to search for jobs. very active the labor participation will show up in unemployment rate or not. i think the balance is probably going to push the unemployment rate up at least modestly and at a slower pace of headline employment gains. you will not see wage pressure that look anything like what we just been. let's remember the cpi was 9%. it is now 3.2%. that happened with steady unemployment. very little of this has little to do with the labor market. tom: our team has put together a nice show today with nice numbers. steven wieting back there is important. early earnings 4.4% and he is working with the 3% statistic. you have real way growth.

-- up. real wage growth is rising in america because of disinflation. tom: you can argue you saw that in personal spending numbers we got this week. consumers are still spending. it is expected to cool a bit slightly this month on the annualized basis and month-over-month, but what the pace of wage growth is consistent with a 2% inflation target? steve: this is a lovely question because we have in the past never had wage group at 2%. the way the last couple of decades have worked out is because price restrained -- goods price restrained. services were higher. we started to hear during this hawkish phase from chairman powell that will list get wages

consistent with 2% inflation and many people thought we have to do something about services prices to make sure services prices growth no faster than 2%. we look at a china that has a 7.5% of export the client and we're seeing where we might end up in a world with a bit higher level of domestic services prices and consistent with 2% inflation like we have been in. tom: i want to go to chapter 23 of the economics book or you are the best, profit generation of american corporations wrapped around a nominal gdp, i believe is coming down, real gdp that is sort of a mystery. is there a belief within your work that profits will sustain? and revenue growth will sustain? steve: i think it is going to be slow but more positive than it has been. there are pieces of the economy, it is a lot like the opposite of the movie title, there is no

collapse at everything all at once. we have pieces coming down and others -- tom: retail is getting hammered. steve: i think we are seeing's something pretty good coming out of this. real wages going up. we are in a service sector but we had a depression with covid. we continue to grow employment to some. during this process, we have been able to start the pull down inventories in u.s. without having a full-blown collapse. that is working off of the troubles of the industry. it is not going to go away quickly. it is not going to be superfast but by 2025, we are going to have a world economy we see cyclical industries start to pull up trade, pull up production, all the things that are restraint right now. we have the same source of the clients in exports that china -- of declines that china is

experiencing in exports. tom: they looked at virtually every sector in the s&p 500 and they found net interest expense as a percentage of net profits slower today than it was 20 years ago which kind of them my mind. we look at corporate america right now, how sensitive is the stock market in corporate profits to interest rates? steve: asset prices could still be sensitive to the competition of higher yields. we have to take a look at every day at relative value of bonds and stocks. in terms of profitability and solvency, high yield companies are outstanding debt stock financed at 6% per year -- finance at 6%. i think the numbers for 2024 only 8% of high yield firms of maturing bonds. it is really small in 2024 of

companies that would have to refinance at higher rates. tom: where is the 10 year yield one year from now? steve: i think that is right. i think we will be sub 3.5% on 10 year yield. tom: steven wieting inc. you so much. -- thank you so much. we are quoting the dow a lot today for pharaoh. the vix 3.48. part of the joe's to get -- party drill -- part of the drill, there's a lot to talk about. how good of a labor day he having? katie: i think he has had a tough week. he had a crushing blow when it come to the appeals court. hopefully he has a good job say because it has been a rough week. tom: it has been a rough week of

the sec but has it been a win for package product wall street? are they there yet where they can say they got a win with an ability to package bitcoin? tom: it is going to be a process. what is the timeline on this? katie: sec has 45 days to a pill so at least 45 days. tom: futures up 13. what my i looking at? let's look at the real yield, 10 year yield 1.87%. steven wieting never believe we get to 1.87. maybe on our way to 2% per year stay with us on jobs day. this is bloomberg. ♪ endless hardie® siding colors. textures and styles. it's possible. with james hardie™.

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hopefully, soon as we get through this, should we say cancer's situation we are in, the malignancy of trump, they will emerge in a strong way with leadership i know is there. tom: the congresswoman of california, none look at the speaker. -- no longer the speaker. it is a difference nancy than what we have seen the last years. in conversation with bloomberg. katie griefeld in for four people today. she is killing it. the start of the road yield is in on jobs day as we get ready for this important set of data at 8:30 and all that is going on. sleepwalk through all this no,

we did not do that. we welcome you on equities, bonds, commodities, and all we do here at surveillance. florida, georgia, carolina's pick up the pieces of a hurricane in america. there is a hurricane to the east of bermuda called franklin. for more -- far more active on the other side of the break is typhoons. does -- on the other side of the break world is typhoons. this is a shot outside his hotel room over in hong kong island, bloomberg headquarters is there as well. the convention center and all the memories we have over in hong kong and the new hong kong, beijing influence. they are implicit by the second-highest tycoon alert -- influenced by the second-highest tycoon alert.

exchanges are shut down. we will follow it through the weekend here. we speak to the typhoon of political strategy. chief u.s. policy strategist at agf. i loved your note about august. rightly note for september -- write the note for september. where will we be on the first? >> three big issues as this month percy's. the first is the very real price -- we could have a government shutdown on october 1. we cannot get a continuing resolution. number two, i think still a tremendous amount of speculation on how ukraine did the last month of september. they are finally making an offensive. things look a little bit better than they have the last few

weeks. the other big story i would argue is the united auto workers whose contract expires on the 14th of september. i think it is entirely possible on october 1 we look at a strike. katie: let's start with the last on your list given that is the most urgent in terms of timelines. what would you expect to happen between now and then? would you expect we can avert the strike? is it starting to feel inevitable? greg: we averted a strike with the teamsters and ups so it is possible it could be inverted -- averted with the last 24 hours that has been nasty talk by the union saying companies are not bargaining in good faith so this will go down to the wire. even if there is a deal, the other big story here is how enormous the salary increases are going to be. katie: that is a timely point given we are awaiting those jobs figures at 8:30 a.m. today and

wage growth is going to be one of the things we look for first. when you think about the political aspect of the strikes and they go across industries and it is been striking if you will to watch this summer, how does the biden ministrations handle this? biden seen as pro-union. how does he turn this into a talking point, a campaign point? greg: it is a difficult task for him. i think you will see more sour rhetoric back and forth. the union is not happy with biden. biden realizes there's a lot of here. i think even a brief strike is going to put the president in a difficult position. tom: we had a republican debate. i assume we have others on the dates calendar as well. as we heard earlier, from speaker pelosi, speaker pelosi, democrat from baltimore, her

father was mayor of baltimore years ago. she is begging for a return of the republican party to a normalcy of another time. is that wishful thinking on the part of the gentlelady of san francisco? greg: yeah. i think her father would not recognize either party right now. i would have to say that one of the amazing stories of this remarkable summer is that with all of the indictments of trump, all the serious charges, he has held up brilliantly in the republican party. he still leads in almost every crucial state by police 30 points, in some states his lead as close to 40 points. tom: a look at where we are. i have to wonder what the response could be to the absolute original position we are in with former president trump.

how does tim scott respond? how does washington respond? how do the big republican donors respond to the predicament president trump is in? greg: it is a good question. i think increasingly the donors and establishment and republican party are looking at glenn youngkin, the governor of virginia, fairly moderate, very wealthy, good campaigner, one a crucial victory in virginia a couple of years ago. i think there is still room for one more candidate. but as of right now, it is going to be an uphill fight for any late entrance to really make a dent in his huge lead for trump. there is a chance trump could be the nominee under indictment, there's a chance trump could be in jail and still be president. it is not totally out of the question. tom: thank you so much. want to draw into your

attention, the absolute world-class character of bloomberg opinion on the legal issues in america. noah feldman of harvard university with this and leadership of tim o'brien, expert on the trump finances way before the politics going back decades. look to bloomberg opinion to sort out so many of these contentious and choose as we go through -- contentious issues as we go through 2024. technical difficulties there with greg. which gives us the advantage of talking with the star of real yield. i guess yesterday firming out a 10 year real yield from about 4.05%, dare i say up to two point 2% as well and i asked does the economy fall flat on his back with 2.2%. what have you learned in your discussion with this? katie: i believe he called it a streaming buy.

that was fascinating and even though you have seen the price action agreed with him, it feels like people are bracing . the investors are bracing for higher yields. there is talk that may be the clear value rate is closer to 4.5%. we got closer that this month. -- close to that this month. tom: listen to all these people and you are suggesting consensus is for higher yields now? katie: that is the consensus i speak to. tom: you do morning tv. -- you do afternoon tv. the morning tv they're looking for lower yields. the basic idea here is it can cut either way. if you go price up, yield down, he is looking for disinflation. if you get price up, you'll down, is it good -- yield down,

is it good or bad for the economy? katie: as a case to be made the fed has inflation under control but you also seeing that speaking to cameron dawson, a level she said. 10 year yield to go back to 3%, it is a screaming for equities. it is a recession. tom: it is jobs day. it is going to be something special. the only one of the team not taking off the day, michael mckee will be here to pick up the pieces with sarah house, senior economist of wells fargo. michael mckee 8:30. good morning. this jobs day. ♪

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tom: belong surveillance. lisa abramowicz and jon ferro are off today. katie greifeld joins us today. are you filming the real yield today? katie: yes. tom: the real yield really matters and especially matters to the federal reserve meeting will see the third week of september as well. a great lineup today. ellen zentner, kroszner will be

with us as well. really looking forward to that. we had three under surveillance today and the first one we sit on as i say and we do this with usd. i asked meredith to take it back longer to the historic -- where i met jon ferro. i met jon ferro in the upper left corner, 2005 ish when it was fixed and they gave way to an ever strong chinese boom and a strong -- and we have started to give it back and give it back a vengeance. we are up 7.26 this morning and there's a lot of talk about moving higher, a weaker chinese yuan. nobody i know is framing it back to 2005 at the vix level, but never say never. there's a lot of turmoil there. katie: i started out covering

currencies and i was fascinated with the you want. tom: bitcoin is a currency. you're going to sell me on that? katie: bitcoin in 2017 did not talk about it as much as we do now. we are blown past that. we initially got about that in 2019. when i left the beat, i been waiting for it and we got past it. look at the levels we are there today. i wish i could tell myself five years ago we would be here. tom: in shanghai, they ease the home buying mortgage rules. francine lacqua drives for the conversation for us. her italian coverage here today. looking at new sauces this week and test on the new model of model three -- tesla unveiling

its new model three. they're not done this for six years with this injury model. katie: there is great quotes in this piece that if you are running with a six-year-old model compared to a steep competition you have in china, you are behind. they unveiled it and to the point you made about bright red, two new colors, stealth great and ultra red. -- stealth grey and alternate red. tom: because of the bloomberg terminal. from the peak of 2021, tesla, 37% from the peak yet it is deemed a success. it is had a good year. katie: tesla synonymous with volatility. to see this chart, may be on a different stop would be concerning, but there have been

a good year despite it being a tough year. they have really tried to boost sales. they are murdering margins to do that and whether or not it is working, it is up for debate. tom: we'll have to see. alec webb giving us perspective here. jobs day -- with ism coming out at 10:00 as well this morning. a plethora of data. i'm looking at the wager dynamic because i think that is what the fed is looking at. katie: just this week, all the focus is on nfp at 8:30. tom: nonfarm payrolls. katie: we had and -- an investment of riches. it seems the message so far as the labor market is listening but i think it is the

wages picture. tom: wells fargo 160,000. what is important here is you pop the monthly number, 140,000 off of an employee base of over 150 million. that is how you get the variance. we are looking at numbers across both surveys against hi numerous american labor force of 150 million. this is tough to do. i got it right once. i quit guessing after that. katie: we are looking at a huge base of employed americans. how employed are they? when you look at the average work week, hours worked going down. they do not want to cut back on workers. as a result, you have people working fewer hours. tom: bostic speaking in cape

town. a shakedown about to happen on debt in u.s. and maybe that speaks to commercial real estate as well. saying on the jobs report we will see in two hours, sarah house joins us now, senior economist at wells fargo. i was doing the math here at 150 million which is -- how predictable are these numbers this morning? do you have a feeling you got your handle on or is it just a complete mystery giving the jungle of the american economy? sarah: payrolls are difficult to predict. bls says they only have a 90% confidence interval that whichever number they print will be from that number. but i think we will see -- we do feel confident that trent is slowing.

i think we see that from a range of labor market data so not only the openings data we saw this morning, but i think also consumers on view that they're not so many jobs out there with that labor differential coming down. we are seeing it in purchasing manager indices, not just ism, but regional fed once showing the pace of hiring has slowed. getting that nonfarm payrolls number within 10,000 or 20,000 of consensus is usually eight win. katie: what its potential impact on these numbers, soft landing debate? sarah: the labor market holds the key to whether you can pull off the soft landing. continuing to see businesses, jobs helping in terms of consumer's income, and therefore their own spending, while giving time some of the supplied side issues from the pandemic to unwind and i think the labor

supply story is very much a part of that. we have seen a pretty nice run of gains or study rates of labor force participation which given the demographic backdrop is effectively up. i think that is helping keep those hiring numbers strong, but i think we have seen them step down and i think the question is to what extent we see that pace continue. the state level off at a more sustainable pace? -- does it level off at a more sustainable pace? do we barrel pass that sweet spot for jobs growth and keep that recession risk elevated? katie: you take a look at expiration for unemployment rate, expected to hold steady at two point 5%. a conversation we had with steven wieting, at what point does the slowing we are seeing on the headline number, pace of job growth translate into a higher unemployment rate? sarah: it is dependent on what

happens with participation so if we think about the run rate to keep unemployment rate unchanged, you are also seeing participation rate unchanged, it is probably only 100,000, so i think if we are getting somewhere around consensus, around 170, we are at 160, i think it is consistent with unemployment rate roughly flat, if you are also seeing that strong labor market pulling workers in and supporting that participation rate. tom: i had the memory of 10% unemployment rate. wells fargo doing industry research based on john silvia looking across the desk audio, each of the american employed public, how confusing is almost a cross-sectional desk a isle analysis now? is a smooth and easy to analyze or is it

just a jumble? sarah: you can get a consensus of what is happening -- sense of what is happening. we continue to see job growth and pay increases as traditional lower paid jobs. we continue to add a great number of jobs relative to the gains in the population and overall labor supply, i would say the quality of the job gains are deteriorating as you are seeing them shipped more towards lower pain sector and those -- paying sector and that does pertain to slower growth and labor income as we move through this year which could constrain consumer spending. tom: what is the howling out of the middle class? sarah: i think you have seen in terms of some of those middleweight jobs where we see slower growth amongst those so you still see that pressure

but the flipside of that is you are also seeing, we talk about the lower wage jobs and he's a decent growth in higher wage jobs. it is dependent upon which way some of those more mid skill workers can -- do they have the time horizon to retrain the higher pay jobs are they forced to shift down into those lower paying, lower skilled jobs. katie: i would love to bring to simmer our strikes into this conversation. we are approaching the deadline for uaw talks. aside from being idiosyncratic, when does that start to show up? what does it mean for wage growth from here? sarah: i think it means it is going to be difficult to get wage growth to slow to a pace the fed is comfortable with on a sustained basis. you see employment cost index

shift lower. the last quarter of just over 4% annualized rate so it is off the peaks of closer to 5%. we see the same in average hourly earnings, at least slowing on trend, but we are still seeing compensation growth running at a pace that is not consistent with the best 2% goal, even when you factor in the activity numbers which have looked decent of late. i think that speaks of the fact that even as we see labor market easing and beginning to loosen, we are not necessarily close yet to a point where we can say it is no longer exerting upward pressure on inflation. and we can really called this recession scare has been avoided. tom: sarah house, thank you so much. we will call you back at 8:30. before this jobs day, i want to

take some time on oil. west texas intermediate 84. brent crude rounded up to $88. brent crude basically across the summer, 74 to 87. i think it has been underreported. katie: it feels we stopped worrying about energy prices in terms of inflation. you think about the headline number we get on cpi, a lot of that downdraft we have seen, you can think oil and energy prices for that. now that we are seeing this climb, back to back gains on crude oil, brent oil, it is going to be interesting what this mean for some of those headline figures and what it means for the fed. tom: doubt we go almost down to three dollars a gallon. we climbed back but i do not

think we climbed back like brent crude. $3.82 a gallon here of from about three dollars. as a lift -- it is a lift. i got. with all of our guests talking here, i got 87.88. katie: you wonder what the sibling is. what we're going to see in term of supply. tom: my answer is a look to the emerging markets for the demand we see in the pacific rim. jay pelosky with us yesterday enthused about what we can see in all you demand -- oil demand. his colleague, ellen zentner at 7:30. join us this jobs day. ♪

♪ explore endless design possibilities. to find your personal style. endless hardie® siding colors. textures and styles. it's possible. with james hardie™. >> the problem with china is the growth problem and the debt problem. the growth problem needs a

revamp growth model, not just tinkering with what you have, but fundamentally changing what you have and the debt issues need fundamental restructuring, otherwise pockets of indebtedness will be -- tom: george clooney from the shores of lake como. it is the gray hair that pulled me. mohamed el-erian there. it is really spectacular. an important meeting where people think about the state of europe among everything, and certainly a lot to think about their. jonathan ferro helping us with the ecb and what we see september 14. front and center right now is china. on this jobs date, we digress of bit and talk to someone with real beijing cred. you go to hong kong and hang out

at the mandarin and you think you are an expert. i'm a china expert. or maybe you actually live it. katie griefeld is here today. tom mackenzie what is the number one think the last think we get wrong about beijing? when you we get wrong about the years you have lived in beijing? >> the change in dynamic as they pragmatism you saw from policymakers pre-2012 when xi jinping took over, it is been sidelined for ideology and also a focus on security risk and if you combine that with what mohamed el-erian was saying about the debt and growth challenges of china, the need to restructure that economy, to

engineer future growth. if you take on board the fact there is this ideological straitjacket now xi jinping has imposed on the economy, then that i think is pivotal change. it does not mean that leadership cannot walk away or adjust and adapt and change the growth model, but i think the around ideology essential as we wait up the debt and growth risk. tom: there's little restaurant they take people like me to to have authentic chinese food, the fact is there is the big red doors, what is going on this weekend behind those big red doors in beijing? tom m.: i think what you're saying now and what we have seen the last 24 to 48 hours is more cremated response between the ministry of finance and the bank. you see the effort to allow banks to let go, reduce their reserves around some of their

foreign exchange holdings and therefore may be more to shore up the downside we have seen from the currency. on the others to the table, you see the ministry of finance come through and implementing some of these decisions around the state. make it easier to get a mortgage. making the cost of getting a mortgage lower. the down payments coming in smaller. smaller secondary cities as well. you see closer coordination in policy that is coming through. yes, we have not seen the overarching lizard with star policy but you have seen additional measures coming more coordinated and it is being implement it on the ground. is it enough? short-term, maybe. medium to longer term, the question very much remains. katie: it feels like i've woken up every single day the past week or so to another targeted measure that beijing has rode out. maybe there is some science starting to work, will be a

scene from the manufacturer and pmi's, the worst of the factory slump behind us. is it too early to say that? tom m.: i think it probably is. you're right to focus on the surveys. an interesting survey because it focuses on private businesses and smaller companies. that is a came through with the official data and that remained weak but you are right, when it comes to the survey, smaller private firms in china, are you factoring back in expansionary territory. how long is the question and the timing of the policy measures. the window is narrow. because of the slowdown in u.s. because the slowdown in europe. has the window close to make a material difference when the rest of the world is falling and demand for chinese products are actively reducing? services and consumption. the team crunching the numbers. they have said, it is going to

do something to shore up consumption. we know how important it is for chinese policymakers. they want to shift the focus onto the consumer by cutting these mortgage rates. bloomberg economics think they will be able to do that short to medium-term and also think it could add about 1% to gdp. katie: your point about the ideological straitjacket is well taken but there is a great story on the terminal about how the slowdown we are seeing in china is a real opportunity for countries such as u.s., some of their economic rivals, at what point does the data weaken to force beijing out of the straitjacket? tom m.: that is the central question. the policy measures they push through the last few weeks going to be enough to alleviate some of the pain. they have a greater ability now they have seen to be able to absorb a slower economy. when i was in china, the question used to be if you get

below 7% is that when social stability starts to fray? that is the level arguably policymakers are concerned about. this is a leadership now, a communist party headed by xi jinping that has it seems ability to absorb more cost, more pain. look at unemployment numbers a month's china youth, 20%, that is on a level similar to spain, italy, and greece. i think this is a communist party and government ready to take a little bit more. they worked through some of the debt issues. they managed to pull back through some of the shadow bank issues. they do not want to see it revived. they are not at the pain point right now. they realize as we downsize traditional measures, the challenge remains. tom: thank you so much. tom mackenzie leading our morning coverage this morning. and all his good expertise on china.

futures advance. bull market, vix. futures up a solid 15 as well. thank you for the team surveillance and particularly the expertise of jon ferro for yesterday's discussion with maximus tappan. -- max ver stappen. i know you are already over that interview and what is going to happen in monza. katie: i'm not super familiar with formula one by am familiar with the next slick show, drive to survive. tom: you have to watch it. it is addictive. katie: my brother-in-law and sister watch it and now they are big form fans. tom: max made clear yesterday he was not a fan. he is not a fan of the next lick show. -- netflix show. he is a traditionalist.

he's 25 years old. he is winning and he won in the netherlands last week and now they are in italy where ferrari is supposed to win, they will not. max will do it again is the assumption after readable. this was -- after redbull. this was a great by jon ferro. katie: dr. survive, i understand this man is a traditionalist and does not like it -- drive to survive, understand this man is a traditionalist and does not like it, -- we would love a version of drive to survive in track and field. tom: nbc did a great coverage of the track and field and preempted what they are doing with english soccer. i know there i hope political think and contracts and agreements and all that but you are right about that. it was game changing for formula one. even i believe it is three races

in america with las vegas going up, jon ferro is trying to get tickets from red bull. lisa, me, john, las vegas. it looks good. even with drive to survive, formula one globally is ginorn mous compared to united states. thank you to all at red bull. back to the jobs day, futures up. yields a jumble. the real yield, i do not know what to say about it. 1.87. i am watching all you'll -- i am watching oil. 7.26 you want to. on jobs they come up many coming up. david kelly out there somewhere is a negative nonfarm payroll

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>> if you look at the economic data, it keeps showing a tight labor market. we keep getting these numbers, strong spending. >> the economy is slowing some but it is not falling off the cliff. >> the equity market is focus on earnings. >> we are in -- waiting for the labor market to catch a cool so we can stop this acceleration of wages. >> the question going forward is can the consumer continue to live beyond means.

announcer: this is bloomberg "surveillance" with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning. jonathan ferro, lisa abramowicz, tommy king. -- tom keene. katie greifeld in. on a jobs day, a great set of guests. we got an equity celebration and continues, the bears in retreat in august. futures up 15. the vix, bull market, 13.47. as i mentioned yesterday, coming off the lows of the vix. that the numbers to a 13 handle, that shows a shock we have seen here. a look at the bond market, i guess it is a turn but with a 4.0%, anyway or ambiguity of the bond market into october, november is wide open.

katie: it is sunny to think in august we got to 4.3 per s -- it is stunning to think in august we got to 4.3%. i that know if you put much stock into seasonals but september typically pretty ugly. tom: 87.96. we may get an 88 print there by the time you get talking today. i want to run to the data. green on the screen. nasdaq up last. s&p up 16. the vix, 13.47. bitcoin, it is under 26,000. plummeting off of the moment last week. we'll talk about that when we get a moment.

bitcoin, 25, 992.95. 10 year yield 4.10% per -- 4.110%. the yen quite essence, 1.45 at what he wanted. what is your observation you see? katie: the conversation we having about oil, to bring you back to the bond market, inflation expectations even though we are looking at back gains in the oil market. inflation expectations continues to fall off the cliff as we continue to see real yields rise. there is an interesting dynamics underneath that nominal yield. tom: you mentioned tom mackenzie, the great conversation with the experience at beijing. here is the headline. the bloomberg headline, beijing eases homebuying mortgage rules.

a series of these out. were almost up to the edge of the comparable, micro headlines of what to do about an economy that is not running at 5% per year katie: to bring it back to the tom mackenzie conversation, there is so -- they're so unwilling to release that bazooka a stimulus and is there to be content with distributed and open question is whether it makes a difference. tom: a stronger yuan. it is interesting to see how it affairs into their monday morning call -- bears enter their monday morning call. humbled by the guess who has shown the across extended american labor day. randall kroszner has been so committed to the show.

arguably our greatest financial economists. jeffery rosenberg will look at yield here off of the job support. really thrilled with this lineup we got this morning. if you go back through a year, there are single moments where things stop on the show. david kelly is trophy taking this year, a number of months ago, simply said we're going to see negative nonfarm payrolls. dr. kelly joins us this morning. the doctors and place -- the vector is in place. how do you extrapolate the shock of a negative nonfarm payroll statistic? david: it is not going to be today, we do not think, and probably still a few months out, but if you look at decline of jobs, it is been significant. we have gone from 12 million job

openings march last year down to 8.5 million now created a number around seven is i think normal for this labor market. as we get to that point, this excess job openings will wear off and labor market will re-represent a lag result of whatever demand we have in the economy. i still think as we get into early next year, the risk of seeing negative payrolls rises and that will change the picture. katie: if we do get that negative payroll print, it'll be interesting communication challenge both for the fed and the biden administration. i want to situate this conversation and the conversation we have been having about the economy, the soft landing debate. there is plenty of camps saying this landing will be harder than expected but you take a look at what we are seeing in the job market, and in this economic

cycle, is it possible we could see a recession at full employment? david: a recession as we depart from full employment, but i think -- there's not really a problem but the problem is we have 3.5% unemployment. we were at full employment essentially the economy can only grow the relative slow pace so you are basically 1 -- a way what does something they'll put you in negative gdp situation. we are not there now. the economy has performed this year. to me the most striking about federal reserve forecast as we are more optimistic on both growth and inflation the next 18 months. the unemployment could stay below 4% for a while. that inflation will come all the way down to 2% or the work by the end of next year. i think that is good.

but we are in a situation where, as the months go on, the distortion of the labor market ringing themselves out of the system so more normal economy with all the risk that entails. katie: on the topic of 2% inflation, do you need to see unemployment rate to get above 4% or is it possible to have both slowing jobs growth, not necessarily fall off the cliff, but back to target? david: i think you can get to 2% without bringing the unemployment rate up to 4%. what we are looking at is, there is a lag effect on shelter inflation and transportation services, as those things unwind for the course of 2024, i think bpce deflator will come below 2% year over year basis even if unemployment does not go up. vice a different from 1970's? -- you have decent rates growth. workers -- as the economy slows

down, wage growth moderate, you can get that inflation down to 2% even if an is below 4%. tom: it is like a david kelly in my youth, the idea of the vibrant american economy. let's talk about our dynamism, there is a doubt out there about the post-covid dynamism the american economy. we underestimate, not so much fancy things like productivity, but do we just underestimate the ability of corporate to adapt to keep it going? david: i think we do underestimate that. if you look at corporate profits the first half of this year, they have been fairly good. to maintain those margins, to find ways of holding labor in

place, investing in new technology. there is a lot of excitement around ai. there's investment going on. companies are adapting to this environment. yes, there will be losers in the economy. there'll be losers among companies but we have a lot of vibrant american corporations that can drive the economy forward. tom: bostic saying there are reasons why r-star might rise -- is a reason why our start might rise. david, r-star is a bunch of plug in we do not do this, do not know that. are you looking to get back to a historic lower r-star or can we reset constructively higher? david: we should abandon r-star together. r-star is the idea a specific interest rates -- but the truth

is at a low interest rates and impacted interest rates themselves on economic activity and on inflation is very minor. why are we so fixated on sending it? i think what happens as a federal reserve overshoes on both directions of interest rates, distorts financial markets, closes long-term problems without actually -- economic activity. we should stop trying to aim as an insignificant little distant start like r-star. the level of interest rates is not significant enough. in predicting economic activity it just causes the distortions. federal reserve ought to get back to normal interest rates and not distort markets. tom: bottle it. the dissertation from trinity, dublin and david kelly was classic. we'll have that for you on

bloomberg digital and of course across all. that was a wonderful effort by dr. kelly to explain a school of thought that r-star is basically a jumble of math. that was a really important statement by kelly of jp morgan. i cannot say enough about what kelly just said there about the math frenzy of american economics. that was the gentleman from ireland talking. katie: throw it away. abandon r-star. tom: i do not know if i would abandon into but i would lose it as a study point. there are other factors out there to make your head spin as well. there was a brilliant moment of our september here. we welcome all of you on radio and television here on jobs day. ellen zentner coming up. randall kroszner coming up. we take a minute here and

bitcoin, you mentioned s.e.c. and gessler having a tough time. to the people that want to package and bitcoin into investable products, do they have a good august? katie: it was a good august, it came at the very end. there are plenty of more hurdles we have to cross to get to that spot. tom: i cannot buy it. the client by christmas? -- bitcoin etf by christmas? katie: you can do it if you go to europe. applications for this type of product so what happened this week, it was approval, but it was a needed step to get to approval. tom: what is the next step here, the next judicial step here? does it use theater, go to the supreme court? katie: living aside was going on with grayscale and s.e.c., the fact that we have active violence from blackrock, invesco, s.e.c. has to respond to those. they had a deadline this week.

they have delayed the decision. they can do that and it was expected. the next date to watch i believe is mid october, the next point at which they will have to respond. we will see. there's a lot of paperwork. there is a lot meetings to be done at s.e.c. between now and then the. it will be a fascinating fall at least in the bitcoin community. tom: futures of 16. it is jobs day, important to listen to ellen zentner, chief u.s. economist at morgan stanley. stay with us on the radio, on television, it is a bloomberg "surveillance". ♪ endless hardie® siding colors. textures and styles. it's possible. with james hardie™.

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>> we do not have shared values, but we have a shared planet, and we have to work with the chinese

to save the planet because they are now i think the biggest emitter come up not us, they are second, and they are part of the solution in all this. tom: nancy pelosi, as we said earlier, a change nancy pelosi. she was bigger of the house -- she was speaker of the house and now it is a very different congresswoman from california. important comes near to bloomberg not only on china, but also our hope as she sees it republican party will find a path after former president trump to something she remembers from her youth. katie griefeld is in today for lisa abramowicz and jon ferro. thank you so much for washing today. i just had a email. yes, we will continue to cover bitcoin. futures advance up 17.

i noticed apple doing well. this is a market bellwether. 4.10% on the 10 year yield. for that is 84.75 on american oil. west texas intermediate of one point 4%. brent crude pennies a of an 88 print -- away of an 88 print. were going to rip up the script as we can always do with annmarie, extremely well read in on washington. very quietly in the washington post lease this morning, i will read the headline, families crossing u.s. border illegally. here is the money code, reached all-time high in august. i believe this is slipped by the

summer. how upsetting his immigration story in washington on a sleepy september 1? annmarie: i do not think it is flipped by if you see what is going on at the border and you see constant calls from republicans who want to make this a campaign issue going into the 2020 election next november, but also we have seen the escalating tensions between top democrats and in the party, the biden administration and new york city mayor eric adams for months asking federal government for help with migrants in new york state. he is joined by governor kathy hochul and top business leaders writing a letter to the government. asking formore help you see the government coming out and looking at federal buildings they can use. i think one of the tax office on long island but they are asking for help because the citi says it is going to cost billions of dollars and they are running out of space. it is a fractured moment.

you see between top democrats, interesting before the presidential election, but potentially problem going to get worse because people are feeling like they are running out of resources. tom: are both parties on the same page? is it like china where there is a bipartisan panic, in his case of immigration, one statistic going from 100,000 arrests in june on the border, up 70% to 177,000 arrests. is there any says a bipartisan or is the normal polarity? annmarie: when you think about immigration as a whole, when you talk about any sort of chance of bipartisanship, it comes back to individuals who want to see really a revamp of immigration law, and they want to make sure they get it under control, but republicans daily fast shall the biden administration -- daily bash how the biden

administration is handling the border. summer mike and penny they want to finish putting the wall -- some are campaigning they want to finish buiilding the wall. it is something the biden administration will not do. the biden administration trying to house more in mexico before they come over the border but it is a difficult situation and if migrants come in, they make it to places like new york, it becomes a humanitarian situation. it is entirely sad. it is incredibly difficult but i would say bipartisanship only starts and and when it talks about revamping immigration law but how you deal with the border, there are is a lot of stark differences. katie: let's talk where there is some degree of bipartisan agreement and that is with china. the congresswoman wrapping a her trip and it seems like she's leaving with more from past

trips of biden administration officials this summer. annmarie: she's leaving with the opportunity to have a more frequent dialogue with her chinese counterpart as well as a working group that will be set up to talk about the commercial ties between the two countries which she really wanted to emphasize that can be the bedrock of this relationship because you see china and u.s. part when it comes to export controls and sanctions and there is also going to be another dialogue when it comes to export control so china feels like they understand what is going on. i would say, there was a bit of a wink wink that happened on her way out of china and that is when -- release a baidu phone that many are saying -- release a 5g phone that many are saying, it blew up in chinese media and it really showed why way able to circumvent the sanctions placed on them to develop this phone.

they were put on the entities list 2019 by the trump administration. that was a little bit -- the timing i thought was suspect, coincidental come potentially on purpose. katie: is an important reminder that there is still a lot of distance between the two sides here. let's talk about the top brass. we think about president joe biden, potential meeting with chinese president xi jinping. i thought they were supposed to meet at the g 20 summit this month. it is seems like a to skip that. annmarie: it does look like xi jinping is not going to be attending. reuters reported this and then we reported that china has just not given their response yet. to the indian government. it does look like xi jinping is going to skip it and in other potential dagger to the u.s. to october, one month after the g20, reported he has a president

putin to come to china, his first trip out of russia since his arrest warrant for alleged war crimes by the international criminal court, he will attend china's initiative so this was going to be an opportunity potentially where biden and xi jinping, even if it was not a full sit-down, they way had in bali that restarted detox -- restarted detoxs and by the -- they wanted see talks. i still maintain to be continue to the end of the year, the u.s. is hosting a pack and there is a chance xi jinping will attend that would be the last opportunity of the year for these two individuals to sit down. tom: annmarie, thank you so much. our chief washington correspondent. balance of power looking for their efforts of the power for september we have ahead. i want to draw your attention to the equity markets and i think

we need to frame out where we are. there's been so much gloom we have seen. just to give you perspective on what a standard 500 has done. over the summer and physically going back pre-pandemic, a lot of the pros -- there are sold or where was free cash flow pre-covid, where is it now, and the answer is bouncing off the bottoms of october, the bull market we are in or gauging to where we are from the peaks here in the recent weeks, the answer is it is been pretty good. do you feel like be at standard is up -- spx is up 13.2% per year? it is a really substantial return now, hard to believe across four years as well. i did a comparison with apple.

everybody talks about apple. apple under the same guise. katie: you think about how consistent apple is a you talk about free cash flow and apple has more cash than ireland. it is a company you can rely on to continue to deliver. tom: there's real suspect here in september. mark gurman leading our world-class coverage on bloomberg and everybody hangs on what he says and all that was a september with the bloomberg technology on the bloomberg "technology" on bloomberg television as well. on the day, ellen zentner next. this is bloomberg. good morning. ♪ , we can do anything. cheesecake cookies? the chookie! manage all your sales from one place with a partner that always puts you first. (we did it) start today at godaddy.com

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tom: one hour away, the jobs report for august. hugely interest aided along with the inflation report coming up as the fed staggers. my guess is pause, pause. randall crossan are coming up, the former fed governor. futures are up 17, a nice list to the market. under surveillance with catherine greifeld joining us this morning.

everyone except david says sour. set sour -- sassower's work from home. our annmarie hordern is work from home. katie: no, that was a nice studio shot. tom: they were successful by seven decimal points. 7.26 right now. we are in still the single headline at so what, mode. no trauma here. katie: it is interesting to see them come up in support of yuan once again. all the reports we got were super strong and now we are getting reserve rate is starting a little bit. china currency weakness is the talk of the summer. tom: this is really cool.

spanning from northwestern australia. you go from perth, way up where the snakes are, then 50 miles out and there is an island which is like lng central. they are having problems in australia. union workers have rejected a payoff from chevron. this has affects globally, including europe. katie: these two chevron facilities account for 7% of global lng supply. we talk about strikes in the context of the american economy all the time, but this is an important reminder this is becoming a global issue. tom: we are going to sit on this for a moment. the basic idea is everyone is trying to figure out 2024 beginning labor day in america. what is the new work from home?

wall street is looking to get americans back in the office. a beautiful grid by bloomberg. each firm has their own attitude. james comer and morgan stanley. he was getting angry there. he said, if they can have dinner in soho, they can come to work. and he sent, if they can stand in trout stream, they can come to work. [laughter] katie: if you think about what jamie dimon said, "i completely understand why someone does not want to commute a hour and a half every day, totally got it." that is a direct quote. but they do not have to work here. tom: the intensity has picked up on september 1. katie: today. tom: today's the day where we

launch. past labor day, and into wednesday and thursday next. leading the charge is goldman sachs. solomon said, get into the office. simple as that. we don't have any sympathy, do we? katie: i don't know. we are back in the office. we may have different indians. tom: tension from greifeld. different opinions on crypto and the office. ellen is working seven days a week for morgan stanley. what is your guesstimate on the impact of the american economy on work from home? ellen: work from home can have real benefits to productivity. tom: i don't think stanford agrees. ellen: i believe there is a chance for women that would normally have low labor participation rates to an is it

be because of >> ability it offers. -- the flexibility it offers. there is a chunk of the population that is disabled and can have more opportunity. tom: i don't want any trouble with fortress gorman but you were down in social having lunch and james orman said, what is she doing? what is a problem with ceo's who all have helicopters and are like, should we be in the hamptons or i met -- or on the river guy: ellen: -- on the river. ellen: for me, i make decisions for my team. i was very flexible or covid and now. the flexibility does not mean you do not come into the office and interact. especially lower -- younger

employees at the firm. they understand they want the connectivity. when i am not traveling, i am in every day. but do you have to be in if you have is to drop off at the is it acceptable to in a bit later? can you finish work at home in the guy: can you extend your vacation by a week and work for dust from there for a week? katie: i love everything ellen is saying. tom: be a journalist, be fair and balanced. katie: fair and balanced by think you make great points. i am trying here. we are going to get jobs data in less than an hour. talk to me about labor hoarding, an dynamic that started 2 up. you have employers cutting back

on ours. is that the typical dynamic tend to see at this point? ellen: not to this extent. it started with earnings last year. around march, we started to see hints of this. part of our stress back then of seeing a soft landing is we the jobs slow but not fall off a cliff. companies have increasingly told us they will hold onto their current headcount, control costs by reducing hours, and i want to be prepared for a pick up in business later as it is difficult to hire you look at the jolts data and job openings are down sharp, but quits are down and firing is down. there is very little turn in the market which means you are taking pressure off wage growth, but that does not mean jobs fall off a cliff.

they will continue to slow. katie:. is that masking what we are seeing at the unemployment level? the unemployment rate is not budging. ellen kullman the interest for policymakers is to say, where is the appropriate level of unemployment? we have seen some say it is very low. one of the important things chairman powell is honest they have been able to slow employment without significantly raising the unemployment rate or at all. that is a beverage curve effects. the beverage curve relates to job openings to unemployment and it is normalizing. so we are able to bring job openings down without raising the unemployment rate. tom: your initial claim which i was privileged to witness was on consumption and retail. we are sitting here with graham,

broader american retail sales in that. give us your consumption dynamic. ellen: sarah wolf, our consumer economist, loves talking with you and has been your or. the consumer, bottom line, has been stronger than we expected this year. there are factors pushing this. you have very love the categories of motor vehicle sales which is just a sub light and pent up demand issue pushing of spending. underlying that is deceleration in discretionary ending, an undercurrent of lower income households having issues. they don't have excess savings and their wage growth is still turning positive because inflation is coming down. consumer spending, which goes into soft landing, is slowing. it has been more resilient. he did research on the barben

heimer effect, the taylor swift tour and beyoncé. tom: how many times have you seen taylor? ellen: i have not. my niece did. i will see her in theaters in october. we have all been to concerts and have an increasing experience -- an increasing demand for experiences. this is extraordinary. she is a juggernaut. beyoncé as well. there is about $1500 per person spent to go to these concerts. tom: what is your number on unemployment were your changes? 20.1% -- to a tenth of a percent. where it is our construct of labor change? ellen: with houses, what are

they hearing from their neighbors and friends? what are they seeing with their coworkers? in the unemployment rate, we have already seen the assessment from households this before the consumer confidence survey really plummeted. either they are going into the labor market and having a tough time finding jobs, or hearing this from their neighbors and friends. i don't think we need a tremendous increase in the unemployment rate for people to buckle down. katie: i want to go back to taylor swift for a minute. i have a good reason because anna wong of boomer economics put out a piece that said, "a swift summer papers over cracks in the job market." see rights that basically this surge in demand we have -- see writes that basically this surge in demand we have seen with

taylor swift and beyoncé is going to fade. ellen: basically, you have taylor swift, beyoncé and barbie and oppenheimer all peeking in the third quarter. but in the fourth quarter, this fades. these one-offs does not mean consumer spending will soften but we think it will decline in the worst quarter. tom: you don't think after barbie the gdp slack? ellen: i try. i shove all the time. tom: ellen zentner, the newly minted president of the national association for economics. s&p 500 is up 0.4 percent. ellen zentner is with those from morgan stanley.

i want to dive into the regular nature of the report. what is the dynamic, in particular temporary workers versus full-time? ellen: temporary workers have been picking up. that can be for good reasons or worrisome and on where you are in the business cycle. went to ferreri workers are picking up, either you are unwilling to hire time because you are unsure about the -- with temporary workers, they are picking up, either because you are unwilling to hire full-time workers because you are unsure, or because of me. tom: this is a spectacular window into the ambiguity. my study, particularly on the federal reserve of st. louis, is hugely ambiguous. people talk about temporary jobs

as uncertain. we have no clue what it will. ellen: anytime you have jobs reports come out, it is always a mixed bag, and there is always something for everyone. bullish, bearish, optimistic or pessimistic. i think chair powell can swagger into the september meeting because whatever happens, they have incredible amount of time to all of the data. tom: ellen zentner, thank you for joining. she is with morgan stanley. she has lifted the markets. futures of 17, dow of 135. jobs day in 45 minutes. randall crossman is next. ♪ ng colors. textures and styles. it's possible. with james hardie™.

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>> i think a correction is not totally unlikely if the economy starts to soften globally and you have inflamed -- inflation.

in europe, if he hiking is somehow more. i would not be surprised there is a 10% correction. tom: nouriel roubini is not as good leaking -- -- looking as -- . in france -- with francine lacqua last night. this is a real lineup of ability in venice to close out the summer. of course, francine lacqua must attend up to lake cuomo to do what they do at amber study. mohamed el-erian told me this is the greatest jacket of all time. syria's conversation about italy, finance, and italian

banking. pulling the most difficult job on labor day in america from lake cuomo, francine lacqua. francine: yes, an italian road trip only to glamorous places. there is a thing called a windfall tax that was unannounced and subtly announced in the markets freaked out a bit. i am delighted to be going to buy the chairman. he is here to talk about the bank. thank you so much for joining us. this was a surprise. it must have been for you. you are one of the biggest banks in italy. what was your reaction to the windfall tax? >> it was a surprise. not a terrible surprise. i do not think the windfall tax will be dramatic for the italian banking industry, but the reaction of investors is not

expected, even by me. because the consideration of the government has always been positive. it is considered reliable. but now, the investors have been spooked by something they did not comprise completely. that was the problem. francine: but the investors were spooked but then said they understand. they may lose up to $1 billion and change what they get back to shareholders, and then they moved on. is that how much it will cost you? >> with the new correction that has been there already -- has been already decided, it would be below $1 billion. at this moment, we do not know what will be the final situation.

because parliament has two months for approving or modifying the decree. that is until october 8. francine: what are you doing at the moment? are the italian banks lobbying the government? what would be your best outcome? >> i don't know because there is an active debate on the political side. at this moment, the question is a political one. we are only spectators. anyway, i have the opinion that this will not dramatically effect italian banking. indeed, the situation is crude and the economy is doing well. we have experienced a slow down but not great.

the italian economic structure is built. the family -- the household settings are good. francine: could it change the way you look at dividends and giving back to shareholders? >> if we have a lower profit, we will have lower dividends, of course. we have given -- a dividend policy of 70%. anyway, dividends will be good in any case. i think people will be satisfied, especially because we are producing dividends. we have an industrial plan which is made of concrete targets. we are facing a transition, a

digital transition, and climate and technology goal -- technological transition. our investors and shareholders are satisfied that we are doing something concrete. francine: talk to me about interest rates. they have gone higher by a lot. is there a political pressure to give more to savers? how does that change not only were but all european banks? >> dividends and interest are a commercial factor. there is a market. what is real is the market is competitive and competition is rising. also, in paying deposits, but it is rising with especially on time deposits. there is a movement from side deposits to time deposits.

this is a sound movement. both for depositors and customers, and for borrowers, and the banking industry. because time deposits are the right way to final lending. francine: tom keene, our coanchor, calls me up every week and says, what is stagflation in europe going to look like? you paint a pretty optimistic picture but do you worry about high-growth and low inflation we cannot control -- low growth and high inflation we cannot control? >> italy has done better than france and germany. we have very resilient banks. we have an economy which is more invested with expert destination -- with export destination. we are very positive.

and we do not see difficulties in npl's. francine: but the government in italy is also trying to change italian capitalism. do you worry investors will be much more wary? >> i do not think this country will be abandoned by international investors. because the yield is very good. and the government has been very responsible, both in economic policy and foreign policy. francine: thank you. that was the chairman of intesa. it is difficult sometimes to talk about bad loans and banks when you have a beautiful view. tom: francine lacqua from venice. look for leaders with look what -- leaders with lacqua each

and every month. people are publishing and working today. kirsten over at apollo is not work from home. he has an incredibly terse note. this is something you follow every day, katie. katie greifeld is in for lisa and john. he said the fed started raising rates. deposits in the banking sector declined your a trillion. almost the same amount has gone into money market funds and the charters. all you need to know is this is a melt up. this is a huge deal. katie: it is a huge deal and issue for small midsize banks that have to pay up to keep deposits. the river the devil downgrade we

got from s&p and regional lenders in august? it was apposite issues they highlighted even though we are past panic. in march, we saw the flow of deposits into higher yielding market accounts. it will be a slower moving for the banks. tom: we also got the hollenhorst taught. mention mentioned uaw and i think they get less credit and respect with the actors and all that. the bottom line is citigroup looks at a 40,000 drag. just when the l.a. strikes. katie: and you think about the ways pressures as well. it is amazing. tom: we are a half hour away from this.

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>> right now, we do not see enough evidence a recession is imminent. >> earnings will have to drive

things for the dock market and u.s.. >> i don't think you will see the fed cut drastically. >> maybe the fed september meeting is a skip, not a pause. >> we might have one more hike in september but that will probably be the end of the cycle. announcer: this is bloomberg surveillance with tom keene, jonathan ferro, and lisa abramowicz. tom: good morning everyone. the super bowl, 13 times a year. each and every month, we have jobs data. we always do the same lineup. there are always thrilled for their commitment. randall kroszner, already back in school. no big deal for the former fed governor to be here. nadia will be here with us in moments from ubs. speaking of nadia lobel, we celebrate katie greifeld here.

futures are up 15 and the equity market advances. katie: i don't know what changed in august, maybe just summer training. we will see if the momentum really gets into the meat. i don't know how many people will stick around after 8:35. tom: you will convince them. jeffrey rosenberg will help us get out strong. he will do uninterrupted coverage to give you a brief into september. i want to go to the data check. across equities, bonds and commodities. commodities are front and center. i have $87.89 on brent crude. katie: it has been a pretty incredible move. for a well, it felt like one thing to go. we do have important meetings and decisions out of opec when it comes to extending supply cuts. going to make a big splash. tom: a real tight market and

demand has been effervescent. 7:10 wall street time this morning, $88.02 on brent crude. the story from september have some legs. on a currency space, we have a turning dollar. 103.67 earnings why. no one expected this days ago. the euro gives it back to 1.0833 . even on labor day in america, this shows a stable swiss franc. as we get to the real yields, this was found by jonathan ferro many decades ago. the real yields has now picked up because jonathan ferro's burdens are picked up by katie greifeld. 1.80 five on the 10 year real yields is the story for the fed meeting. katie: it is interesting to see

them move. i remember when we were at extremely deeply negative real yields. and a lot about, what will this mean for the market? we are at decking highs and then some right now and it does not seem to be making too much waves. tom: -- said something simple, price up, you'll down. katie: what did he say? 3.5%? tom: price up big time. plus, you will be in the austrian is in make seven years and make road gains on the features. [laughter] we start with the impact on the equity market. nadia lobel joins us. senior equity strategist at ubs global wealth. thank you for starting out strong in this hour. a soft landing. no one saw the last six days coming in equities but ubs day.

why do you have to be in the market to participate for capital gain? nadia: i will give a nod to jonathan ferro. we seem to think about things as bad news is good news. in the market. we are seeing some of this play out this past week in terms of some disappointing macro data but we still point ourselves and see a repricing in the bond market which is giving some reprieve to the equity market. we don't want this to go on too long because that will be a depression, a self-limiting scenario. we think the market will also lead -- will oscillate because we think the peak in the market will slow down. we think this will limit sector earnings from here. tom: totally unfair office six days of analysis but can you

state on september 1, 2023 that we have a broader the market? nadia: yes. we think the market will broaden out. we can do a favor with some areas of the markets where evaluations are more reasonable. we can see some trending on the surface. where you will see cycling out of expensive areas of the market , you are already starting to see this the last three months if you look at the physical weight index. that is starting to catch up. tom: you see how nadia lovell does put me in the timeout chair? she knows i did not read her note and katie greifeld did. [laughter] katie: i did read your note. i want to talk about cash. talk about your allocation to fixed income, but i want to talk about the sword and day of the yield curve. we got updated data yesterday.

nearly $5.26 trillion. do you look and say this is all caps on the sidelines and belong to the equity market? nadia: i think it belongs to both the equity market and fixed income market. what we can do is really extender ration with portfolios. we have seen the backup over the last couple months. we have been extending duration, favoring the billion of this. we continue to see opportunities in the five to 10 year range, with high investment grade bonds. eventually, we think bond yields will come down and you want to bought in yields. we are looking for the 10-year yield to come down. with the economy slowing to 3.5 percent or 3.75%. locking in these yields at this point is very important and extending this duration. katie: walk us through the

thought process when you are thinking about billing and the benchmark 10 year bonds. is extending duration right now a call that the fed will cut? or do you see the economic environment turning and we start talking about a recession? nadia: we do not see a recession in the near term. at the start of the year, who are more on the cap of a recession, but consumers remain strong. there are pockets of his but we super remains was yet. this is a call of inflation coming down faster than expected . we are already seeing this in core pce which is on trying to come down faster than what the fed said in the gsvp. we are only 30 basis points off so we think inflation will come down faster which will allow the fed to cut in 2024. which will drive bond yields. tom: we got a jobs report.

so much of it is in the angst. even with 4% unemployment rate. there is a staggering middle class and people struggling at the low end of the from. that is witnessed recently with retail. to be direct, retail craters. as equity retail, xrt and the rest of it, a value opportunity now or is retail a value trap? nadia: you have to be selective in retail. he think there are some value traps but also some opportunities. yes, the lower end consumer has been feeling a pinch, but the reality is the consumer is still spending. we saw this in visa credit card data. consumers are still spending but just being choosy about where they spend and how they spend it. if you look at e-commerce, there

is an acceleration. you want to focus on companies that have commerce presence and also in the retail space. tom: i cannot emphasize enough how important that insight is. you are not doing i sale -- doing by total sale on amazon, but this is as newsworthy as it was six months into the pandemic. katie: when you look at retail pricing power, how much is left at this point, and how much is different between amazon versus a brick and mortar shop? nadia: we are already seeing this even within the consumer product companies that we are talking about throughout the earnings reason. that has been passing along additional pricing increase. this is something you have to be mindful of. particularly as inflation comes off and the consumer is exhausted. tom: nadia.

help me out here. spx 5000, 2024? [laughter] nadia: 2000 24, we are looking to get to 4700. tom: you are killing me. thank you so much. in the market, you have to participate in the game. gina martin adams over at bloomberg intelligence and nadia lovell at ubs. with bitcoin, where did we go? 66,000? katie: 69,000. tom: howdy people got out? katie: if you look at the chart, quite a lot of people left. they still have not come back. if you look at the five-day chart for bitcoin, got a big after the decision came out in

favor of grayscale over the sec. tom: 26,065. katie: 30,000 was seen as a key level. the thing was, if we get above that, we will pay. that was not the case. tom: what are the ramifications if bitcoin breaks down? katie: i don't know. when you think of the flesh we saw of retail, after we came of record highs, if we get back below recent exciting round numbers, we can see another flush out. tom: 8/11/55 jobs day. it is jobs day and we will go beneath the headline data as i said earlier.

michael mckee will be along to translate. he does it better than anyone literally without exaggeration. i have a 4.4% year-over-year wage again as a statistic which does not include eci benefits. but if i have wait here, i have inflation supposedly below it. the answer is maybe we have a positive role wage in america. katie: that is good news. if you are in retail, and he rely on consumer spending. all eyes on wage growth. as we try to figure out, what is distant with the fed inflation target? tom: jonathan ferro is all over the ism number. i don't know what that is about but it is up 50. the answer is it is pretty

gloomy. 47 is one of the key statistics. katie: hearing diffusion makes me nervous but the northstar for the is helpful. -- the north above there is helpful. tom: we have a bid in the market. all kidding aside, 15 minutes for the job for work. the market believes in the american economy into the market believes in revenue and earnings. 4533 spx. i cannot believe i am saying this. am i going to give the nasdaq a 15,000 in the first days of september? michael mckee at 8:30, and it is jobs day. ♪ endless hardie® siding colors. textures and styles. it's possible. with james hardie™. get help reaching your goals with j.p. morgan wealth plan,

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inflation, excess demand, and responded wrongly. our inflation has come down but it has nothing to do with the fed. it is basically because we resolve the supply-side problem. we are lucky joe biden got things right. the fed got things wrong but the two will balance out. tom: this is important. amy, thank you for putting joseph stiglitz of columbia university there. it is a really interesting time, before the jobs report. that is joseph stiglitz. i do not think most people know why he won the nobel prize. katie greifeld is in for bramo and pharaoh -- ferro. sassower is working from home

or something. i don't know. getting ready for college football season. but this is cool. to talk to randall kroszner, one of our greatest financial assets, of joseph stiglitz. with one of a huge successful books. years out in front. writing is from chicago, which is not columbia, is randall kroszner, who is not joseph stiglitz. yet you know that sandy grossman and joseph stiglitz wrote a paper that you and i read six times. it is a nobel prize paper that is six pages long and has the smallest, simplest equations that mohamed el-erian says is the "unknown unknown." why did joseph stiglitz win the world prize -- the nobel prize?

what did he say? randall: what if the key things is thinking about how markets work. as you said, sandy grossman as well, talked very deeply about the in market prices. it is those insights about how markets gather information from different people, not in the traditional voting booth, but through people buying and selling securities and assets. the information is reflected in the market prices. tom: does grossman and stiglitz work in a fragmented america in 2023? randall: i think it so largely does. we have seen where people have different views of where tesla is going, and where the economy is going, they did not say everyone gets it right all the

time, it is just reflecting information people have. people have incomplete information. we are in a situation where the fed and others have incomplete information. katie: we are going to get more information in around 11 minutes. put this into context. the size and scope that it is the final one before the september meeting. what are the final ones of 2023? what piece of the puzzle is this? randall: this is important from the fed perspective and job perspective. so a very strong jobs market. the unemployment rate is set roughly 50 years in unemployment lows. we have been undershooting where market is expected we would be. we have been overshooting since the beginning of 2021. a bit of a slow down there.

one of the key things is wages. because that is where the fed is looking at. when it thinks about where is inflation going, it thinks about what are the key inputs and key cost factors, which is wages and overall employment costs. even with manufacturing, employment costs are a very high-fat there -- or a very high factor. it is all about wagesw and compensation. i think the fed will be really focused on this piece. katie: we have been talking about this all morning. the fact, after adjusting for inflation, u.s. workers are earning something. they are seeing wages increase. you factor this into inflation, extrapolate that out. how much of this is a further fuel for racial pressures? randall: it is great that

workers are finally getting a real way to prove -- a real wage boost, but that is also a challenge for the fed. they want to bring inflation down. this is a challenge and will affect the demand for labor. when real wages have been negative, that is -- when real wage growth has been negative, people want to hire because they are relatively. now they have become expensive which will also weigh on the job market going forward. tom: randall kroszner with joseph stiglitz, talking to francine lacqua in italy. we can go back to gary, indiana giving us joseph stiglitz and grossman. the poverty is painful and heartbreaking in gary, indiana. what is your policy prescription to help the poorest of poor

people in america on this jobs day? or if we move beyond that, where there is no help, it is a welfare state. randall: there are lots of things that can be done. one, making sure we have a strong labor market and strong economic growth. that is important. also, inflation tends to hit people at the lower end of the bactrim harder. people at the lower end tend to hold more of their total wealth in cash or deposits. most people have been earning almost nothing on that as inflation has been going up a lot. trying to bring inflation down will also be something. tom: randall kroszner. jonathan ferro is on vacation over in italy. he says, get back to the stock of the federal reserve. can the jobs report actually

shift from the federal reserve nerve as the go to the september meeting? i don't buy it. randall: unlikely, but if it is an extreme support -- an extreme report, it could. if we see the wage number going up very dramatically, this will increase the likelihood the fed will act in september. if we see a report in the range of what we are expecting, wage growth continuing to be 4% or so, and job growth 150,000 to 200,000, they are more likely to cause and see where things go. katie: i am looking for your notes from august 4. you write that the fed had a gift. the inflation rate is coming down and the unemployment rate is not going up significantly. they would like to preserve this. is that sustainable? randall: this is the great

question about whether we can have a immaculate disinflation. if we can bring inflation down without the unemployment rate going up substantially. it has never happened before. i have never heard of someone living to the global financial crisis of the fed, but it will be difficult to bring the inflation rate down in a sustainable way. the unemployment rate at least moving from where we are here. there is still a lot of wage pressure here. before, if one of the major cost factors for services and many acts ring is going up at 4%, -- for services and manufacturing is going up at 4%, it will be difficult. tom: randall kroszner will stay with us as we are five minutes away from the job from work. jeffrey rosenberg scheduled to be with us as well. i don't want to oversell it.

features with a list of 16. dow up 21. the vix at 15.47 really speaks. as you go to your show, the rail yield gets back to 1.85 katie:. katie: you can see this expressed. the fact we were i 4.40 feels like a while way now. tom: a 30 year mortgage affects the housing company of america. four minutes away from the jobs report. always a mystery. michael mckee. on the radio and television across america, work surveillance -- bloomberg surveillance. ♪

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tom: jobs day in america. jonathan arrow and lisa abramowicz on the shin -- jonathan ferro and lisa abramowicz on vacation. katie greifeld in. with our usual lineup of brilliance to give you perspective on american labor in the economy. futures up 17, the vix at 15.4 eight. michael mckee gives us wisdom. mike: things are better than expected at 187,000 jobs created

during august, exactly the same as the prior month. i am waiting for revisions to drop. . the unemployment rate rose to 3.8%. we will check on the nonfarm payrolls revision in just a second. the change in manufacturing payrolls is big, 16,000. that was in the adp report, kind of odd given the stories we have seen about many actually these days. average hourly earnings came in much slower than intesa needed. 0.2% increase. this was what was expected. labor force participation rate rises 62.8%. that is interesting. the july number for the total

payrolls is 157,000 after revisions, significantly lower. which means we had a rise to the same level we had last month. that means probably a revision to august will be coming. private payrolls, 155,000. that was initially reported as 172,000. it is 179,000 today. thank you to bob in connecticut for pointing this out. this is the kind of report that will keep the fed sidelined in september. tom: november? mike: i will not go to november yet because anything can happen. there are a lot of threats to pull on. tom: you go deeper on this report with randall kroszner, coming up. right now, it is fed-friendly toward a pause.

futures advance of 26. dow futures at 1.50. the vix is 13.28. could you imagine a 12 vix to set up your labor day weekend? katie greifeld, help me. in the bond market, the 10-year yield is 4.06. the real yield, a one point 82 r.o.e. yield speaks volumes -- 10-year yield speaks volumes. for those on the radio, it is a real adjustment off this jobs report. a weaker dollar as well suggesting a lower rate regime across america. you can see it with the yen dollar coming in solidly at

1.88. are the actors and screenwriters and those on strike, can you plug in an l.a. entertainment strike to give us these gloomy numbers? mike: i will give a bigger one. the yellow trucking company going out of this is. this costs about 30,000 jobs during the month. if you add them back in, you would have a much more significant jobs again than what we have seen. the other thing that stands out is we have had a decline in state and local education, which is a seasonal adjustment issue because august is when everyone goes back to school and teachers should be on the job. it is pushing down the number. it may be artificially low. tom: mike, you mentioned, as you always do, the wage dynamic. you told me year-over-year is

for old fossils like me. month over month is for the cool people like michael mckee. the month over month hourly earnings number from 0.4 to 0.2 is substantial, right? tom: it is. -- mike: it is. interesting that people in manufacturing who might be on strike coming up are higher paid jobs. they would influence the overall number. we saw a big increase as we have almost every month in leisure and hospitality. 40,000 jobs added there. construction is interesting because 22,000 additional jobs at a time when people say they cannot find construction workers and homebuilders are putting homes out not as fast as you can do. the truckers lost 37,000 jobs. that was a significant headwind

for these numbers. tom: i need to slip in one more question as he dived for the 9:00 our. amc says ms. swift, her concert film breaks advanced records. you have been doing this for years. can two entertainers, taylor swift and beyoncé, move the needle? mike: no. the amount of money they generated is stancil -- is substantial but a drop in the bucket compared to a $24 trillion economy. i don't know how they would think this would add to august employment. it began in march. you would think that would be accounted for. tom: and you have seen how many shows? three? michael: yeah and i am going to follow her to europe.

i might go to the movie just to see what everyone is talking about. tom: michael mckee will dive into this data. futures are up 0.6% as well as a nice nasdaq lift as well. randall kroszner is here. we are going to go to the fed. can you glean a fed that will change its attitude toward the november meeting? randall: i think, this is kind of roughly what the fed was expecting. we have seen a little less wage pressure which is good from the fed perspective. we have seen greater labor force participation which the fed also likes. a sideways -- aside from what is counting increasingly for the unemployment rate. you are seeing the goldilocks scenario the fed wants. the labor market is softening

but not cratered. it is taking pressure off which will take pressure off the fed from raising rates. i think it is really unlikely they will move the next meeting. there will be a lot more data to come between now and then. but they are likely going to hold through the rest of the year. tom: we have to run but one more quick question. a dual mandate. is it really a dual mandate for the federal reserve system? randall: this is the big pivot that came last year at jackson hole when jerome powell said there is one thing that we will do, and he said eight times that we would fight inflation. he said we have a dual mandate but the inflation part is the most important. this year was more back to normal that we have to worry about both in leeson as well as the employment part. that is why the fed is looking carefully at the data to make

sure they don't raise rates so much that the unemployment rate is zooming up. it is hard to get this perfect. a lot of people think the fed can perfectly engineer a soft landing and has so much control and can move the unemployment rate up just 1% -- just 0.1% or 0.2%. it is not so easy. tom: randall kroszner, thank you for joining us. why don't you bring in jeffrey rosenberg? katie: jeffrey rosenberg, over at blackrock. it is great to talk to you. you have shortened yields plunging and futures getting a bit of a bid. when you go through these numbers, is that the correct reaction? jeffrey: i think it is. i think this is the report the market was looking for. you may have had a bigger

reaction if it was stronger than expected but this is the reaction of pricing out the last hike the fed jested they may have to deliver -- the fed suggested they may have to deliver. the front end of the curve both in reels and nominal's is where you are seeing the biggest reaction which prices in the biggest expectation for fed policy. the labor markets are normalizing which is the main message from today's payrolls report. wages are softening. a little on the market. not really much movement on the three-month averages. 0.2 you just missed rounding up to 0.3. it is at 0.24. you are seeing a slowdown in wages so the fed will talk about that, but when you look at labor force participation, that is a big change in what the fed wants

to see. that is the reason for increasing the unemployment rate . as we saw with jolts data, this is exactly what the fed is looking for in terms of getting the normalization in the labor market, seeing the reduction in vacancies to unemployment, coming through the vacancies and less from pain of unemployment. that is why we see equity on the risky side and also positively responding. ready much a nice number for everyone to go into -- pretty much a nice number for everyone to go into the holiday weekend. katie: at certain point, the fed will have to cut interest rates to bring race back to more normal mutual levels. this this report push the rates further into the chore bring them forward -- into the future or bring them forward? jeffrey: it is important what

you highlighted about the need to cut interest rate. not necessarily to bring them to more normal levels, but it is about restrictive policy for longer, not higher for longer. as inflation falls, which is about the wage inflation picture from today's report, the fed have to cut rates to avoid the real interest rate from increasing. that is what the bond market has priced in. a gradual decline in inflation, leaving the fed to have to cut rates. because it is a hard landing or because there are overly tight, but because it are avoiding becoming overly tight to maintain restrictiveness. this feeds into the market consensus and expectation. tom: these findings are extraordinary which is we had a failure of transitory, and -- there is an ambiguity.

if we get price up and yield down. but we are almost back to a successful victory lap for the fed. do you agree that this is a fed on the edge of the relapse? jeffrey: one thing we need to be careful about is we have certainly seen victory from these very aggressive, very historically distorted levels of inflation due to the covid supply-side shock. this is very different than claiming victory that the damage that had occurred as a result of those policies, as a result of fiscal and monetary policy over stimulus, has completely been run out. this is about the victory from a 3% to 2%. last week, vote two main takeaways were dated dependence and we are not -- data

dependence and we are not abandoning the to percent inflation target. before you can claim victory and do the victory lap, we will be talking about, what is it take to get you from three to two? tom: free labor day, we do this with jeffrey rosenberg. we are out doing this correctly, talked about the accu medical -- teh acumenical pce index. are you looking at the one year annualized or six-month annualized or one-month annualized vector for inflation? what is the liquidity of the exciting right now? jeffrey: on the headline and

core, you are seeing progress. part of the question is it is much more relevant to look at the near-term numbers and utilizing what is the patent -- the near-term numbers annualizing what is the core decline? the wage inflation picture that feeds into be more durable aspects of inflation, outside of the commodity and goods sector, which is deflating because of the supply-side improve. what has been very supportive over the last three months is the three-month level of poor core inflation has been declining. it is feeding into a soft landing, landing on inflation narrative. it is still a slow pace and that is what you see in today's wage number. but it is going in the right direction. that is positive for the market.

it is still slow but the labor market normalization story got a boost from today's reporting. katie: i want to bring the conversation more firmly to the markets. ian lyngen was on surveillance a couple days ago, calling the 10-year yield a screaming buy. when you look at this report and the data we have gotten the past couple months, do you think now is the time to step fully into duration? jeffrey: when we talk about the ration, it is not so much how much the racing but where -- how much the ration you hold but where. i think the screaming buy is the two-year banking from trading up. there, you have the best combination of yield and they -- the exposure as we are seeing in today's market reaction changes in this normalization.

this is the part of the yield curve where i think you will have the best risk-reward. when you start talking about the long end, now you have to consider whether or not term premium, the long-term inflation premium, and whether the long-term rates are priced appropriately. and whether the post-covid appropriation yield curve at historic levels of inversion is where you want to be concentrating your diversion. i think there is much more ability at the long end given the degree of inversion. which says you are not being paid in terms of yield for fundamental factors which could be increasing in a post-covid environment. tom: jeffrey rosenberg of black rock. a solid seven basis points move is a big move for those keeping score at home. futures of 0.6%, of 26%.

nasdaq giving the same 0.6%. the vix on a tear at 13.29. he is piling on pages of data from labor from bea and census and other seven organizations. what is the mckee insight? mike: we also checked her grocery list. 736,000 people into the labor force during the month of august. a huge figure. that is why we saw the unemployment rate go up because 2000 22,000 got jobs -- because 222,000 got jobs and the others didn't. they were expecting employment to rise and it did. and they were expecting employment to loosen and it did. that tells good news. the other thing to look at as we did see a rise in unemployment

for whites, but black unemployment went down to five point 3% from 5.8%. that have reversed a couple months ago and gone way up. that is better news because there is always the fear of last hired, first fired. tom: is there a big difference between 3.9% unemployment and 4.0%? psychologically? mike: i don't know whether american people would think that. as long as they have jobs, there are probably less concerned, but it is the fed looking. everyone thought they would have to change this because it would be too high. now, maybe it is within reach. tom: the chief u.s. interest rate strategist, bloomberg intelligence and bonds. ira jersey.

will this come down? ira: very little. this is already price for the federal reserve to cut interest rates and cut interest rates. i am focused more on the front end and how the market is interpreting this data in terms of not only in november hike -- not only a november hike but also that the fed data will hold for even longer than both thought. we are still in this environment where the market is going to remain inversion for a long time. but this data has to be pleasing to the fed. this means you can have 2-year yield's that remain below 5% for a while. katie: feels like we are well below 5% at this point. your two-year yield is below 1.80 -- 4.80. where will the pressure come from? what andaya of the curve will be driving that dynamic? ira: the long end of the curve

will probably be where it is now. for percent, 4.10, 3.8. but it will be the two-year yield that will drive the shape of the curve going forward, just like it then we got to -100 basis points of the curve. now that we are down and likely to trend lower over time, you will start to see un-inversion of the curve. today's date is almost goldilocks because you still have an environment where you are growing jobs but the inflation component of the data is slowing when you look at the wage data. this just means the fed can remain on hold jerome powell has been talking about well into 2024, if not until late 2024, assuming we do not start to get naked with jobs. katie: we have seen amazing moves in the bond -- the jobs

market over the past month. if two-year yield will probably stay below 5% for some time, if you look at the benchmark 10 year treasury yield, where is equilibrium? ira: depends on what model you use for fair value. some say we are close to fair value but our fundamental model suggests we should be lower, closer to 3.6% or 3.7%. the risk is we can rally a little, particularly if we have softness and things like the equity market where the path of least resistance is going to be toward some of the lower yields as opposed to higher. tom: if the 10 year real yield breaks down, what is a ramification of that? there is a technical level. it was brought up yesterday. if you get at your yield of 1.8 5%, i don't know where the

breakdown is, but so what if the real yield walks away from 2%? ira: summits the fear of missing out. if we are truly in the inflation regime, then people should light real yields and like being able to buy tips and get compensation on top of positive real yield. we spent a very long time with real yields being negative, and quite substantially negative, for a long time. tips in some ways are pretty attractive at these kind of levels. when we talk about the right moves we have seen the last few months, it has not been in his next thing but real yields. the way we look at real yields is there are two major things that affect them. one is the liquidity and volatility. importantly, it is also

expectations for policy rates. if the policy rate is going to be going down at some point in the future, you would expect real yields to follow that. will we get to zero or negative? i don't think so. but we can rally. tom: thank you so much. because of time, futures up 25 right now. we get to the equity markets off this shocking jobs report. sarah hunt joins us. chief market strategist of alpine saxon woods. ro stumbled. i have a return over the last decade and a line of of people with fear. how do you push away the fear into september, and to the fourth quarter, given this economic data and a successful fed soft landing? sarah: good morning and thank you for having me.

this is an interesting report especially since we revised last month negative. ira jersey stole my goldilocks moment. i was going to say this was a goldilocks number because you have all the components working in the direction he said wanted it to go. we were looking at 4.5 percent unemployment at the end of the year and it has been steady that the number did not look achievable. i also think the softening wage gain is also something the fed was looking for. the interesting thing is about the number of people who have come back into the labor worse. you have to wonder if a combination of the x the pandemic surpluses the shutdown and student loans are coming back. it is possible so many people do not have to go look a job and are now staring down what is not as rosy an economics picture.

katie: this is good news for the fed. this seems to be the narrative in markets right now. how noisy is this data? you look at some specifics from the bls and will and see payrolls fell. trucking industry payrolls fell by 37,000. how much of a piece of the conversation will some nuances like those be? sarah: one of your earlier gas was talking about the fact the economy is moving in cycles and nothing is moving in the same time. historically, everything goes down and everything comes back at once. we have been through awful times at the pandemic where we have rolling recession numbers and not those other numbers. you are experiencing a boom on the slow down. the labor reporting going on is probably slowing down as companies are getting harder -- it is harder for them to put prices in this environment. that is where you will start to

see movement. tom: sarah hunt in the market in what is a bull market with a vix of 13.29. she is with alpine saxon woods. michael mckee. he and i have miss this great bull market. we have to keep working. mike: i have been looking at more numbers and want to give more -- one more number in honor of the lady sitting between us. people with two jobs. [laughter] it rose by 300 during the month. so you are considering yourself special. tom: we are temporary workers right now. mike: for temporary workers, the number went down a bit i believe but it has not been a major impact on the numbers lately. tom: i am fascinated now how we stagger to the inflation report. i can't remember, september 12

or whenever. the inflation reports coming up has to have an even greater weight after this. mike: it would have to be bad for the fed to go in september. i will not touch november because there are a lot of numbers between now and november and everything can change. tom: futures of 23, dow of 128. on the real yield, we make jokes about it but i am sorry. the number ira jersey of of a real yield down to 1.3% is game changing and very different from europe. polar extremes. katie: not just for the bond market but when you think of the readthrough for assets into corporate credit, where the real yield goes is very consequential. tom: can you talk about the 30 year fake mortgage? can we call labor day weekend

the end of the 80's in the housing market? . i don't know -- katie: i don't know. tom: technically it is brutal, above a 7.5% level. i mentioned a professor from harvard university talking about how you measure the inflation rate across the one year annualized, six months, or three months. the other thing you need to talk about is simply disinflation and where the outcome is in 2024. there is a huge divide between andrew hollenhorst and what we see from edward hyman into evercore isi. katie: and where the strauss report moves us on the narrative may be a win for disinflation. tom: it is a two-year yield after rosenberg craters.

the yield went up on jobs data, 30 year. no house hunting this weekend. thank you to our team for a spirited friday labor day report. stay with us. this is bloomberg. ♪ alix steel deliver alix: knob, u.s. payrolls topping estimates while wage growth starts to cool.