>> we think rates at the current levels are too restrictive. >> we are not expecting a collapse but no doubt consumer is slowing. >> not much has changed with the good zoom over the last six month. they are employed, wages are growing. >> toward a weaker economy. we should not be surprised by this. >> it looks good now but we see slowing going forward. >> this is "bloomberg surveillance." jonathan: live from new york, good morning. coming into thursday, waiting for the appetizer to friday. your scores look like this. equity futures shaping up as

follows. your day ahead, a sneak peek looks like this. 8:15 eastern, adp report. 8:30, initial jobless claims. 10:00 a.m. eastern time, ism services. lisa: these numbers are going to be important not only because of the and markets but yesterday's jolts data which for the same month we got the jobs report in august, july numbers, really showed weakness. do we see current data that confirms that, this feeling maybe there is this retracted weakness that will require from the fed and could potentially be something different than what the markets price? jonathan: echoes of early august are growing? compare and contrast, ism manufacturing and july early august, people start to get nervous, jobless claims, people start to get nervous.

then we get the payrolls report. how close are we to repeating what we already saw a month ago? this ago this is what a lot of people are talking about. -- lisa: this is what people are talking about. we are seeing the bad news percolate from a number of corners but weakness does not mean weak. it is not as though the sky is falling. yes, you're seeing cooling but not as if there is a mass group of layoffs. looking forward, here's the issue. are we set up to touch differently given the outperformance of the equal rate given the cyclical rally we have seen so far? jonathan: you can feel the anxiety. 10 year yield at the moment, 3.77. we can talk about the shape of the curve at a moment. i want to talk about payrolls tomorrow. 165 is the median estimate for headline payrolls. but he does service, the focus

will be unemployment. looking for the unemployed rate to come back from 4.3% to 4.2 percent. for many people, that may the data point to put more weight on. annmarie: everyone asking fed officials if you see weakness in the labor market, is it enough to potentially go 50? she said she was unsure just yet. drew matus yesterday told us hours worked. if more people working less hours, it is finding harder to find full-time work and likely that means layoffs could be on the way. jonathan: one quote from chairman powell at jackson hole, wyoming. was yesterday evidence of further cooling in the labor market? lisa: some said yes because you saw the ratio of job openings to the unemployed following to blow levels in 2019. there are a number of data points coming at at if i which powell had to say about the market being looser than what we

saw pre-pandemic which is a concern for them given what monthly trends have been. that said, i go back to the beige book, my conversations yesterday was ceo's. none of them are talking about things falling off the cliff must they're talking about expansion, consumers that have not dropped off the map. this represents a confusion of this moment. the anxiety a never happens linearly. there is a feeling that maybe this time is different. jonathan: for every ceo youth on, i can find one that says something different. a dollar tree dollar general, the struggles. painful for those two companies of the past week or so. lisa: that raises concern. look at the beige book. jonathan: third time he had mentioned it. lisa: people underestimate the difference from boston, atlanta, new york.

some say it is fine. you saw that in richmond. st. louis, reducing profit margins. chicago, weakening of demand could result in layoffs. new york, hiring -- these are actual tangible feelings, the difference between the regions but in general, nine of 12 cooling. to me that is significant. annmarie: employers were more significant with their hires. there selective stop not falling off a cliff but it is slowing down. jonathan: what do we think? how many times did your the word choiceful? lisa: you want to know my honest opinion? no one is listening. i don't like that word. are they being choosy? choiceful, what does that mean? jonathan: it sound like positive connotations. it does not. lisa: you are voting. i can make choices. are they choosy? are they struggling?

give me something that means something. annmarie: picky. jonathan: they are struggling and no one wants to say that. lisa: it is another way of saying -- they have got discretion and it is more competitive to get there dollar. i am trying to figure out how much they are having to reduce prices and treat margins versus not. if things were falling off a cliff, they would have come out with the more negative picture. jonathan: great have you back. you were missed. equity futures on the s&p 500 just about unchanged. welcome to the program. in the bond market, plenty of price action for you. 3.76 65 for the 10-year. turning positive on weaker jobs data for all of the second time since 2022 but still struggling to close at that level. lisa: it closed at that flat

level for the first time in more than two years. the question, is it good or bad sign? we have typically seen this be a good sign of recession that when you have an inverted yield curve and it does not diss inverted, that is typically when the recession stars. at this point, or sing at the front end, the fed is expected to cut rates aggressively in order to stave off the economy. you're not seeing runaway activity on the long end. i. know what to make of this. -- i don't know what to make of this. jonathan: we can get some views on that for you throughout the morning. we will catch up with john stoltzfus of oppenheimer. isaac boltansky of btig. and kathy bostjanic. top story, jobless claims data at 8:30 eastern, payrolls numbers tomorrow morning.

looking to the preview of the fed's next decision right and we are looking for a 25 basis point rate cut to be announced on september 18, potentially to be followed by cuts of 25 basis points in november and december if needed. joining us now, john stoltzfus. we looked at dollar general in the last week. dollar tree the last 24 hours highlighting the pain the consumers going through. you want -- what is behind the call? >> i think what it is, it is where we are today. we're in the process of a normalization moving toward sustainable growth at a pace where we don't grow inflation to height and yet we do not destroy the labor market. you don't want to get defensive now. it is the wrong time we would think.

we want to be broadly verse a fight to take advantage -- first the fight to take advantage of what has been a rally across the 10 sectors since midyear. at this point we would say if anything, the jolts numbers -- if you look at them, i went back from july 2009-july 2018, which was a real period of recovery moving through the average jolt was 4608. and people got paid out of shape of the 7000 number yesterday. i don't get it. jonathan: people do get it and they're buying staples, real estate, jill it is. why is that the number one place to be? >> i don't think it is the wrong place to be. i think you would to own some of them, i just would not be overweight utilities. the performance on a

year-to-date basis, on a basis from the lows of october 5 and in the rally points we have seen all favor cyclicals in a very definite manner. it is where you see the earnings growth. although, there has been off the good earnings growth in utilities within the s&p 500 but a lot of that is likely been the result of regulators allowing utilities to charge more as their input costs have gone up significantly over the last few years. lisa: the cyclical play has gotten a lot of attention, has done better and outperformed over the past couple of months. what hasn't is nvidia, down 22% since june 18. why not just uber it up to a discount? >> i think the other day, it is over 100% since the start of the year even with that pullback.

you have got to figure what we are seeing now is broader diversification being selected by investors after we've seen these narrow periods, narrow leadership with the s&p 500. as we are in a period where the fed has stated it is very much concerned about not wanting to her jobs, you're going to get a rate cut coming up earlier than we had expected. september, 25 basis points. as you mentioned in the beginning of the segment, there's a good chance that we are thinking 25 in november potential and another 25 cut in december. it is as needed. no recession yet. more people likely to skirt or avoid recession. we think you want all cyclicals.

but once the fed begins to cut, you'll see a more sustainable rally potential from small and mid-cap stocks which have faded out during this period. lisa: previously thought rate cuts were not necessary in this economy and the as needed label on the bottle is being whipped out now at a time that that as needed is somewhat concerning the people, particularly four cyclical areas that depend on a less choiceful consumer, one that is sort of discretionary. how much are you concerned that it is as needed for the fed to potentially cut rates as much as 50 basis points this month? >> i don't think they're going to do 50. i don't think it is quite needed. the calls for 50 really come from highly leveraged players. when you talk about the dollar stores, without getting in

particular with either one of those, you have to remember a lot of their constituency has been supplanted by the likes of the bigger discount companies in the s&p 500 that have offerings that are more competitive and more attractive because in the case of the largest component in the consumer staples one it comes to big box kind of shopping, they just have the volume to be able to get better pricing. the fact some of those stores in another era could be very popular on lower income, you know, their offerings are probably not as attractive, perhaps there managements have not work as well as the larger companies that are mortar and clicks. jonathan: execution issues. interesting last were there. john stoltzfus of of a number on the federal reserve.

it doesn't matter what we think, it matters what they're going to do. early on the week saying maybe the biggest event was 11:00 a.m. on friday. the quiet period for the federal reserve kicks off on saturday. at 11:00 a.m. on friday, there's a speech from governor waller. if they want to go 50, that is the moment to signal it. lisa: chris wallace will be the one who comes outside ultimately we don't think the economy is falling off a cliff. this is what i project the speech to be should be good at disappointing payrolls report. basically, he says we don't think the economy is falling off a cliff. we think it is overly restrictive. our current condition. we need to adjust by a measure that is representative by how restrictive we are based on the conditions. we want to make sure the labor market is sustained and not deteriorate. jonathan: i wonder if governor waller was happy with that impression of him. he took a deep breath i had of

it too. let's get you updated on other stories. dani: nippon still proposed as takeover of you still has all but collapsed. president biden will formally announce's decision to kill the deal. nippon and u.s. steel have suggested they could challenge that. u.s. steel has been warning thousands of jobs are at risk. nippon made extensive concessions in recent weeks committing to invest 1.3 billion dollars and u.s. steel mills. tesla says it will launch its full self driving technology in china and europe in the first quarter of next year. the tesla ai releases roadmap on x, outlining a protein -- outlining different stages. tesla sees it as a way to boost sales and stay ahead of its chinese rivals who are working

on similar systems. tiffany is planning to downsize a major flagship store in shanghai. sources say the two floor 12,000 square-foot store will mostly be vacated later this month but blue box cafe will remain open. it has been an increasingly challenging business environment for luxury brands that are facing it slump in china. that is your brief. jonathan: thank you. it is tough in china for luxury players. this from j.p. morgan earlier on today, it'sbuy recommendation. "the impact of a potential tariff war 2.0 could be more significant than the first tariff war. we expect tennis long-term growth to train down structurally due to supply chain relocation, expansion of u.s. china conflicts, continued domestic issues." lisa: this is a fascinating point where every retailers looking to continue its presence

or even expand in china even while saying there biggest concern, a tariff war. jonathan: up next, united of u.s. steel. pres. biden: united states steel, iconic company. vice pres. harris: should remain american owned and american operated. pres. trump: u.s. steel is going to be sold to japan. i would not let it happen. jonathan: that conversation, next. ♪ your shipping manager left to “find themself.” leaving you lost. you need to hire. i need indeed. indeed you do. indeed instant match instantly delivers quality candidates matching your job description. visit indeed.com/hire trains.

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jonathan: payroll stated just around the corner. this morning, 8:15 come adp. 8:30, equities futures just about and change. 10-year, 3.76. united over u.s. steel. pres. biden: united states steel, iconic american company for more than a century, is going to remain an american company. vice pres. harris: u.s. steel should remain american owned and american operated. pres. trump: u.s. steel is being sold to japan. i don't like that. u.s. steel is going to be sold to japan. i would not let it happen. jonathan: the latest that u.s.

steel should remain american owned and operated. president biden is prepared to block nippon's takeover of the firm as soon as this week. writing "the only lesson the market can take from this one is to get the wheels turning on high-profile deals well before the heat of the -- with a throw the comments from u.s. steel to the wall street journal in the last 24 hours, making the case without this deal, there will be job losses in the headquarter will be moved out of pittsburgh. the question i have to ask, is how to the campaigns change? who makes the most compelling case? alternately, they can protect jobs without a takeover? >> watching that intro, it some is heartening to see theirs hedge agreement among the political parties about -- there

is such agreement among the blood go parties. it is built on protectionist soil. that is something the market needs as a takeaway from this. had this till been announced a year earlier or later, i don't think it would have faced the same amount of political headwind. i think when we start thinking about foreign investment more broadly, we're going to have to start thinking about this from a timing perspective as well to try to avoid these large elections, especially for something as iconic as u.s. steel, given the significance of pennsylvania. lisa: if we have the president about a block this deal, went away for the recommendation legally, what happens next? what does u.s. steel do? >> i think we have to assume there's going to be a lawsuit here. i think, first, we're going to have to see the legal reasoning. i spent a fair amount of time on this. i don't see were the national security risk is.

i don't think there's a viable argument there is a national security risk. i also don't think there is any semblance of an argument to be made that japan is a risk. but we are going up to see what the reasoning is. a lot of time spent and i'm still reason -- i'm still believing that lawyers can come up with any argument. we will at to see what we get from that. my gut tells me this is what a litigation. i think the companies have a good shot here depending upon what that reasoning is. it is just time. it is time. they're going to burn more time. you wonder if the calculus changes for the parties. annmarie: there working on high-end chips together. this is one of america's starches allies. if they say there is a national security concern, one of the biggest allies taking over investing in u.s. company, then what leg do they have to stand on in the future? >> if you can't sell to japan,

who can you sell to? this is something i struggle with as well. there is a cognitive dissidents here were we are trying to elevate and deepen our relationship with japan in every way to counter china's rise. in this one instance because of the name of the company and because of where it is headquartered, this doesn't pass muster. i think that is something that all of us are struggling with. all we want is to know the rules of the road. who can buy and push the transactions forward? the fact is, this rejection doesn't comply with the rules of the road as we have known them. i think that is going to have a chilling effect on foreign investment and i think it will add volatility to markets where otherwise we would've had certainty on the rules of the road. annmarie: what i talk to analysts and executives, it seems to be there's a believe whether it is protectionist, potentially antitrust issues are mostly for the election.

and after that, it will go back to what makes sense for business. do you think that is true? is that is something you feel what history has shown? >> i think there will be small windows you can operate in. shortly after elections and before we get into the ramped up period of midterms and then presidential -- that we are always in an election cycle. i think this deal, had it been announced one year prior or later, maybe the calculus is different. but for my clients and what i'm trying to argue, there is not much or that unite the parties. this new protectionist string that you are seeing both in the republican and democratic party is something i don't see going away. maybe you can time ends up so you are running through review at the right time. maybe six month after inauguration rather than a few month before the election.

perhaps you can time it up that way. we're in a constant campaign season. jonathan: thank you, isaac boltansky of btig on u.s. steel. u.s. steel yesterday down by more than 70%. i was surprised -- down by 17%. i was surprised. lisa: lack of conviction and maybe liquidity. jonathan: coming up, a brutal ev reality check for the auto industry. ♪ stomize it for you. get your business out there and get more customers in here. no sweat... for you anyway. create a beautiful website in minutes with godaddy.

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jonathan: welcome to the program. equity futures, just about and trained -- unchanged. and change on the s&p. nasdaq slightly lower. plenty of price action in the bond market. to your down to 3.76. the tenure, 3.7646. the yield curve is very slowly normalizing after being inverted for the most part the last two years. this after job openings came out yesterday, lowest level since 2021. lisa: it has been the two-year driving this. just a couple of months ago at

its peak and yesterday closed at its lowest closing level going back to september 20 22. this even his 10 year yields are lower by just a half percent you see them closing since the lowest level 2023. basically, is this a suggestion the fed is going to get ahead of any kind of weakness? cut rates aggressively? keep the economy afloat? or is this the believe that essential we don't know anything about the long-term, we can bet on the short-term that looks like the fed has some room to cut so let's go there? i don't understand how bullish versus bearish this is? jonathan: we saw a movie about this a month ago. data came out, manufacturing was saw. a jobs number, jobless claims came out, soft. payrolls ultimately came out and did the same thing. the next several weeks we had jobless claims come out that came back down lower. that put a lid on some of the concern. i wonder come here we go again.

if we get a payrolls report tomorrow and jobless claims number at 8:30 that signals things are ok, do we put a lid on this again? does is reverse or have we gone somewhere we are not returning from? lisa: i decompression as we have gone somewhere we are not returning from. -- my deep impression is we have gone somewhere we are not returning from. this highlights a shift in tone. we heard this from mary daly. she things a policy is very restrictive. she would not say whether 25 or 50 basis points. this indicates there has been a shift in the balance of priorities for a fed reserve that squarely believes where we are is way too restrictive for the economy at our hands. jonathan: check out the move in the fx market. just as you think we have cut the link between japan and the

u.s., people are talking about that all over again. lisa: how much of this has been unwound given how many -- how much money has gone into the dollar trade. a question of how far the divergence can go between the japanese economy and u.s. economy, who is driving on the boat is both because you have japanese real wages unexpectedly rising overnight at the same time you see disappointing data in the u.s. better-than-expected data or harder than expected data in japan. there are still a lot of work to be unwound fully if you do see that divergence continued to widen. jonathan: top stories, vice president harris calling for 28% capital gains tax on people earning $1 million or more. the presidential candidate seeking to ensure the wealthy pay their fair share in contrast with donald trump. also -- annmarie: he was embracing something closer to 40%. i spoke individuals close to

paris and they want to demonstrate she is taking real steps to try to make sure she is talking to the business community, showing the business community she is a safe pair of hands but at the end of the day doesn't matter what trump or kamala harris have to say on taxes, this is going to be the biggest fight in the u.s. congress. the composition matter so much for the taxes of next year. lisa: a polite way of saying it ain't gonna happen. joe biden paying mean and she can come in and play nice. jonathan: mean grandpa. can you imagine the republicans running with that? where did that come from? lisa: that is what libby said. she didn't say that. jonathan: are you blaming this on libby? let's go to a different story. lisa is still digging. nvidia responding to a bloomberg news report about the u.s. department of justice sending

out subpoenas saying it has been in contact with the agency but has not been officially subpoenaed. the company adding its competing market stems from the superiority of its products. confusion over this. i will read these words verbatim. "the doj sent request in the form of what is known as civil investigative demand which is commonly referred to as a subpoena. the department of justice has sent such a request seeking information about nvidia's acquisition of ai and aspects of its chip business according to one person with direct knowledge of the matter." lisa: it sounds like semantics. what you call something officially? at the end of the day, the direction of travel is obvious when it comes to with the doj is seeking from nvidia and they're concerned about this company and the fact they think it is basically has too much of an edge, too much of our market share, and they are concerned with this acquisition of run ai.

i think the idea they did get a subpoena potentially lisa: is semantics. lisa:of course there looked at. at a certain point, there the dominant behemoth. of course people are going to see what kind of monopoly are they getting over this. how much does this curtail future growth and business? share price seems to suggest people are worried about it could be the shares are off 22% from the record high after still rising more than 100% so far this year. hard to know how much to read into this given the fact it is on the status quo to be investigated by antitrust officials, by the doj just by virtue of where we are in this particular policy cycle as well as their dominance over the field. jonathan: correlation between success and investigation and always has been. lisa: right? jonathan: and video is up -- nvidia is up in the premarket. mary daly telling reuters the fed needs to cut interest rates to keep the market healthy thing

it will come down to economic data to determine by how much. jobless numbers at 8:30. automakers turning to cost-cutting measures. volvo alleged to change course -- changing course. volkswagen defends plans to consider factory closures in germany for the first time in its 87 year history. on top of the stories, tom narayan. good to see you. the reality check for some of these automakers, vw's and we maybe have two plans to many. or we about to go on a big cost-cutting cycle in this industry? >> i think companies like w have wanted to do this for a long time. they have these challenges they face. very difficult when 25% of your company is owned by the government and -- just some

extent, this is a political move to something they have always wanted to do. you are right, we don't need as many cars but usually as we did in the past. what they thought they would need to produce. this ev slowdown is in full effect. vw has been pushing aggressively toward an ev future, full electric. in europe, the data has been shifting aggressively to hybrid. look at the toyota numbers. they sold a ton of hybrids. part of it is lids pivot maybe not as aggressively to those that require a dedicated plant, maybe now they can produce more hybrids on existing facilities. you don't need as much. part of it is the ev slowdown and part of it is political gamesmanship, something they oppose wanted to do is reduce the plant footprint. jonathan: let's talk now ultimately they're crying up for more subsidies? they have to subsidize the hell out of this. >> that is been the issue.

the end of last year, germany cut the subsidies and you are saying the result of it in the ev sales kind of follow-up a clip so far this year. in europe, the ev demand is all about subsidies. they have these huge co2 rules they have to comply with. you don't have that issue in the u.s.. they're going to have to step in. the problem is, can his government support the subsidies? that is an open question. until they do so, people keep buying hybrid. jonathan: will the market find it? i see this issue in europe as a major one for financial markets potentially. ultimately, cutting factories. they want to hold onto them because they're worried about politics. ultimately, either they allow the factories to close and people lose jobs and politics goes further to the right away from the incumbent or that to come up with the money and subsidize the hell at of this

industry. whether they have the appetite were ability to do it even if they have the willingness is another matter altogether. lisa: which brings 2009 back to the fore. the question of what efficiencies or inefficiencies emerged from that. tom, from that experience, what will this look like in five years? what kind of legacy european program will there be? i can't imagine there government will allow this to fail. >> you are right. two things could happen. either they loosen some of these rules, for example, the ban on ice's -- the flipside is, you know europe. they go down and course, that is happening. that is what we learn what we talk to folks there who understand the political sphere is this is happening. green party, etc., has a lot of

power. they're going to try to go toward co2 compliance. that means the governments will have to step in eventually or the hope these automakers have is maybe not today but in five years, battery prices could come down. it is a chicken and egg thing. right now ev's are expensive to make because there is not enough made so there is no scout economics. but when you make a lot of them, the price comes down. but if nobody wants them, can't make them. it is this weird dynamic. you need the government to step in to catalyze this, to lower the pricing. i have to believe eventually that is what happens. maybe we are in a lull phase and demand comes back in a few years. lisa: if i were a pessimist, and i was struck by how many chinese cars were on the road. it was different than what i see in the u.s. i was struck by that. at a certain point, as you get the discussion among officials

in germany and elsewhere and debates about how much they can subsidize, someone is knocking on their door and bringing vehicles in and that is china. how much is that permanently steel market share? >> that is a bigger threat. it is not really a threat today. i don't know if you were in norway, but in germany, you actually don't have a ton of chinese ev's. i think it is something you hear a lot about in the press. there are tariffs. europeans have put on them. but certainly, what's the chinese are producing those cars locally, it is going to be a threat. no way around it. at that time, in a few years, the european automakers have to get their act together. they're going to have to reduce prices, produce batteries mystically. it is tough. they have to sell cars in china and they don't want to upset them. that is a big threat.

if i am an optimist, i would look back historically at europe -- i was there for four years. you don't see a lot of japanese cars. fiats in italy, volkswagen and germany. they like their national champions. i end think european consumer at the end of the day will buy the car their country, but to your point, maybe something is different here. we have to wait and see. i think that is a bigger threat than sphere years. ultimately, the governments will try to protect because it has to do with jobs, that is what europeans care about more than anything else. annmarie: news that the union saying with vw, potentially we will accept a four-week work week in order to maintain people keeping their jobs. you mentioned the ira. what parts of the ira stay or go if we get trump? >> i think it is difficult to undo the ira. a lot of these battery

production facilities are in purple or red states. that means jobs. something i don't think trump wants to do anything to destroy. but i do think that ultimately they could take away some loopholes like there is this lease to pull. if you lease an ev, you get the subsidy. that could potentially go away. there could be some limitations on when you can get the $7,500 credit. if you get a lot of sourcing from china or some amount they could try to attack that again. but that happens from both ministrations. ultimately, battery production in the u.s. is both ministrations would support so i think it is here to stay. jonathan: some companies are doing ok. you mentioned toyota in the right place at the right time, stuck with hybrids. who is doing it right now? >> talking bout soft landing and

rates and all that. if we do get into a soft rounding -- soft landing, this is attractive because they built up so much cash during the pandemic and now some of these guys are buying back a ton of stock. notably, gm. if we get into a soft landing, i like that name. if you want to be defensive and worried about autos, i think i name like ferrari, even though it is very expensive, it is a place to hide out. i know this sounds really weird, in a weird way, tesla is defensive because it is not really autos. they could pull the lever and lower fst which is something everyone should try and i think that could be interesting. jonathan: nice to squeeze in ferrari. tom narayan, welcome back anytime. lisa: he is pandering. did he pay you off? jonathan: not at all. lisa: do you own a for ari?

jonathan: i wish i did. let's get an update on stories elsewhere with your bloomberg brief. dani called --dani: please and china have detained five current and former employees the british drugmaker astrazeneca. they are chinese citizens being questioned over potential illegal activities. one probe related to the company's collection of patient data, authorities also looking at the importing of liver cancer drug that has not been approved in the country. astrazeneca said they are aware of the situation but have no further information. verizon says it will buy frontier communications for $38.50 per share. frontier bills itself as the largest fiber internet company in the u.s. so the condo would help verizon offer by the spread

. the 2024 nfl season is upon us. the defending champion kansas city chiefs host the baltimore ravens tonight. the league exits brazil debut tomorrow where the packers and eagles face-off. betting on games this year is predicted to take another leap forward, $35 billion in wagers is expected to be made the season. jonathan: up next, payrolls just around the corner. >> we see a good number closer to $100,000 this month and we will have to reassess our view on the labor market. the print should come in solid. jonathan: we will talk about that next. this is "bloomberg." ♪

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jonathan: good morning. going nowhere on the s&p 500, which is maybe good news. and the bond market, back of a big rally to start the month of september. 10 year, 3.7684. payrolls just around the corner. >> our best case is a love the softness we saw in the month of july was driven by hurricane beryl. we will see a rebound from the state of texas in which case our payroll print will be about 150,000. it we see number closer to 100,000 this month, then we will have to reassess our view on the labor market. our best case is the print should come in solid. jonathan: looking at two labor market data for evidence the fed has achieved a soft landing. adp employment at 8:15, followed by jobless claims at 8:30 head

of the highly anticipated august payrolls report tomorrow. kathy bostjanic making this call. solid 160,000 net new jobs in august following the softer than expected 114,000 in july. this moderate rebound reflects a resilient labor market despite broader economic uncertainties. kathy joins us now. you draw dissension between normalizing and deterioration. is that without a difference given the guidance we've had from the fed chair in the last few weeks? >> good morning. no, i think that is exactly what he is talking about. the fed all along has been aiming to slow down the overall economy and pull the overheating labor market. if we do get the consensus like forecast and we are right there with the consensus, if we get that solid increase, then i think they feel confident that they get -- there on the way of achieving the result of a soft landing.

there is that normalization. you look at the jolts data, the job opening, unemployed workers is down closer to one in 2020 22, an overheated condition. however, the careful what you wish for because it is the pace of the deceleration that things get away from the fed and we could see a slower or harder landing in the labor market than desired. jonathan: when you look at the underlying growth makes in gdp, when you look at the lack of cyclicality and hiring in the jobs report, where does your confidence come from we stabilize at these levels? >> our confidence is i would say for this quarter, as we look ahead, we do think we see employment growth slow below trend, looking for gdp growth to slow below 1%.

that is a soft landing. but what you're saying is those a cyclical sectors like health care, even leisure and hospitality, they would be sturdy, even education, government, they continue to add jobs even when the more cyclical portions of the economy are struggling. no doubt, there is an issue from the labor market is cooling. i think the federal reserve needs to come to the rescue of the economy, remove the restrictiveness and policy, and then help stabilize things. that is the call for the soft landing. there are great risks around that call. lisa: what is the downside going to 50 basis points where there is enough signs this is a restrictive and maybe very restrictive fed policy that potentially is going to accelerate any kind of weakness? >> i personally would prefer they did start a bit quicker and go 50 basis points, but i think the risk is the markets will

extrapolate even more aggressive fed tightening. they are already pricing in over 100 basis points of rate cuts for this year and then 200 basis points over the next -- for the full year and by the end of the year, 100 points. i think that is where the fed is tentative. they don't want to market to raise further at of them -- race further ahead of them. there is uncertainty about the inflation. still feeling that sting of the q1 numbers. looking at three months annualized rates, there is clear reason for them to actually go a bit bigger. lisa: if the 50 basis point cut, if they are considering that by concerned that signals bad news, is bad news, and this is a serious deterioration in the economy, what number would we need to see on friday that could push the fed to that 50 basis point cut? >> that is going to be a tough

decision for fed officials. i would say something around 100,000 or less moves the needle. if the unemployment rate takes up higher -- last month it rose to 4.3%. if it goes higher, then you will start to hear concerns with the rule being triggered even more so and that means perhaps recession. fed chair powell, he's going have to work hard to make sure he gets a consensus. the fed, they could cut rates with a few dissenters but i think the first time out of the gate and cutting rates, chairman powell would probably like to have no dissenters and a full consensus. jonathan: kathy, thank you. kathy bostjanic i'm nationwide. where we have consensus, using interest rates on september 18. the difference between 25 and 50, pretty big right now for some fed officials. lisa: drew mattis just wrote in.

he writes, 50 does not equal two times 25 and says they made this a mistake cutting as they did hiking, waited too long and tried to catch up like the hikes that will be unforeseen problems. this is what kathy was talking up with the market. going a bit further, even the fed is signaling. jonathan: touched on this yesterday, go 50 when you cannot when you must. financial the next data point makes investors second-guess the decision. ultimately, pressing more. lisa: creating that weakness you're talking about to boot. jonathan: up next, dan greenhaus. the second hour of "bloomberg surveillance." ♪

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>> the recent volatility has shown us how quickly the market can change. >> it will be harder if you don't get those mega caps names trick -- contribute into the index. >> the real question is the speed of the deceleration. >> this still opportunities in higher quality assets regardless of the economic environment. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. >> a big morning for economic data. good morning, good morning. the second hour of bloomberg surveillance starts now. scores look like this, we

started the week equity futures just about positive by almost 1/10 of 1% on the nasdaq with some stability in contrast to the volatility of the last one he four hours or so. the day this morning packed, 15 minutes later, a: 30 initial jobless claims paid after that 90 minutes, the ism services report three pieces of economic data, the appetizer tomorrow morning. lisa: setting the tone at a time where we seen those jitters exacerbated paid here's the issue thinking about this for the past hour this question of are we just can asea repeat of what we saw in early august we got the end of job numbers. i thought was interesting about that moment was how quickly became back. rbnz is quick of a rebound with what you're seeing in markets that see otherwise -- seem otherwise resilient. annmarie: he views all of this as normalization, that's the debate. are we normalizing or to what we just heard from kathy a moment

ago, pace of deceleration. if this becomes weaker than the fed was expecting couldn't get away from that. >> you want cyclicals over defensive's at a time when defenses are doing pretty decently, staples, health care and utilities. >> he believes if you end up cutting rates pretty aggressively it will fuel the next length of the recovery. the irony on the recovery before we get the downturn. here's the rub of this economic cycle. we've had this sort of paddling duck or spooning swan. this issue of essentially of different economies that are moving in different speeds and so how do you sort of bet on the ones that are such revised. jonathan: i thought it was the perfect way of framing the price action over the last few days. equities right now on the s&p

500 keep it together. positive by 1/10 of 1% in the bond markets. yields up by 377 on the 10 year compared that to the two-year at 377. the two year 10-year is a most perfectly flat right now. we did this in early august and then it unwound. lisa: it feels like something is different because the fed has leaned into the markets expectations for rate cuts and that's the most interesting aspect of this. do we see the long end increase from here in terms of yield price lower or do we see further rate cuts. right now we are seeing 2.8% of the cycle for fed funds rate. do we see it go lower. hard to see the same time sing the likes of howard marks saying it should be between 3% and 4%. >> coming up, and greenhouse same to look beyond the recent selloff in equities. donald trump ed, harris but economic policy in focus and we

-- sing the fed put is back. we begin with our top story, u.s. equities looking to put an end to today losing streak as it builds ahead of payrolls friday. saying i'm not too worried, equities are still near record high with its fast recovery from the japan selloff. we just have to wait for the jobs report. dan, good morning. dan: i'm furious i was not there for the swan conversation. jonathan: we can start with markets. what has this show become. let's talk about payrolls tomorrow morning. how do you expect this market to respond to it? dan: this is a fun parlor game to play but anything north of 140, 150,000 jobs is probably fine. the goal here is to slow job growth and that's what's happening and you're seeing that in a number of areas.

the labor did -- differential. the one pushback output to the market narrative is the rise in the rate. and there is this idea that the 1% increase in the unemployment rate is explained by immigration, but inflows to the job market. i think to my inc's pretty clearly there's job losers and you don't have to be phd, the government tells you the number of job losers there are. so clearly the labor markets weakening, a number in that mid 100,000 range is commenced truth with the fed is trying to do and what the market wants to see. >> let's compare and contrast labor dynamics. labor market dynamics are somewhat concerning for many people. when you look at credit and the amount of supply this week and how well that supply has been taken down is there anything to be concerned about? dan: you brought a credit supply.

year-to-date high-yield issuance let's call a 30 billion or so that's flat year on year. there are some inter-asset developments i.e. some loan issuers are shifting back to the fixed income market to ship from floating to fixed but generally speaking you don't really have this issue on the issuance front, on the spread front jump sure you discussed ad nausea him. for high-yield and for ig so there's no signs of stress there. and even when you go down to the lower rungs of the market facilities in the amount of time there's issues to deal with, but they are by definition idiosyncratic. there's no economic or economy wide concern that appears to my i to be festering in the credit markets. >> let's extrapolate that out. i found a lot of nuggets and year that were really quite interesting putting from the chicago region. existing businesses were seeking financing to cover higher

operating costs because the ability of past price increases onto customers had sailed. how much do you see a potential consequence to lower rates going forward in fueling an unhealthy bout of borrowing that could change the narrative we are seeing that's really keeping an eye right now on markets. >> it's probably down the road. with respect to the first point about prices, of the consumer staple companies, the package goods companies been telling us for six months now the pepsi's, the general mills. you look at the reports and any staple or package analyst or knows this, all of their growth is explained in prices sales volumes have declined quarter after quarter. all of them of told you the consumers, so we know that. it's not too much of a surprise. in terms of a spate of unwelcome issuance. let's not pretend interest rates are zero and we still are at

five plus percent. we are on our way as a number people of said into the threes and fours granted over time. i don't know if that spurs some unhealthy or unwanted borrowing damage. that type of thing happens in far more excitement. when we are in right now. lisa: there's a question on the longer-term what we are pricing in. basically agreeing with the sentiment like a soft landing. have we overprice that scenario? dan: the soft landing? i don't think so. there is a reason why no one -- recession spread there's a reason very few people get famous selling short, it's very difficult to do. when you look at the data as it presents and is likely to unfold over the next six months where you have some semblance of clarity would loan further out, the -- this is what's happening.

the fed is beating to reduce interest rates. there are signs from individual companies that things are getting worse although it's not really particularly bad. for the immediate future at the present and i was suspicious of the fed's ability to do this so i say this not a someone who protected us all along. from my vantage point the fed is getting what it wants for now. as an investor at least from our standpoint, i'm constantly on the lookout for something that's can it tell me tomorrow does not look like today. and it's always easy to see in retrospect so said another way, what am i likely to be upset about tomorrow that i can see today? i don't see that now. i try every day to see where i'm wrong. to re-underwrite my views and ideas and by extension and i just don't see a reason right now to think there is some imminent threat to the asset

defense game. i apologize, i just don't see it. annmarie: you think a lot of this is churn in the larger names but you also talk but the fact you think politics is involved. why so? dan: the spread between the equal weight in the market cap weight we've all discussed at nausea him it bears attention right now it appears to be a lot of ai related selling, those ancillary gains on the politic side of things i'm not one of those people who think politics dictates everything that goes on in the market. however, i'm also not immune to observing that the day the market peaked in the middle of july is entirely commensurate with the day donald trump's odds of winning the election peaked as well. and so i believe it was september 15 was the dayton that predicted odds of him winning peaked. the stock pete on july 16 just a day later. we know kamala harris was

selected as the next -- i'm not trying to be provocative. but that was july 21 at rbc the market has struggled since and i think there are why am skeptical any individual data point effects the market we are dealing with the expiration print there are spending and tax cuts for the market as a whole. so the headline coming in here talking about what it means if the tax rate goes up or down. so there are political implications that investors have to wrestle with and i think based on that observation are indeed wrestling with it. jonathan: capital allocation decisions. given everything you said in the last eight or so minutes. dan: has it been eight minutes? we are having so much fun. jonathan: too much fun. dan: i don't think you can have too much fun. call me crazy.

jonathan: lisa started to call this a swooning swan. dan: how do you beat swooning swans? [laughter] dan: listen, we still find opportunities as everyone does it becomes relative, we have been long the consumer for lack of a better word in the sense the idea it's always on the verge of collapsing is not some that made sense to us. we are a fund that historically has done a lot of work in the space particular the media and telecom and so we still think they're stuff to do there but on the energy side of things obviously you could pay little bit of attention to what the saudi's are saying but listen, there's still a lot of stuff to do. commence ruth what i said earlier it looks ok and is likely to continue doing so we are still optimistic about asset prices and her ability to perform them. >> come back soon.

dan greenhouse of solus, let's get an update on stories elsewhere with your bloomberg brief. >> volvo car scaling back its outlook rising tariffs hurting some of its models made in china. the swedish automaker abandoned its 2030 target to sell ev's only. sluggish sales have been a growing busters of carmakers forcing them to walk back. the electric transition in europe has veered off course. governments have scrapped incentives and a larger customer base hasn't fully materialized. former publican represented of liz cheney says she's voting for kamala harris in november. cheney says her decision is based on the danger she believes donald trump loses. adam kinzinger, a former illinois representative jeff duncan, former governor ashley tenet governor of georgia endorsing harris. presidential nominees donald trump and kamala harris have agreed to rules for the first

debate on september 10 according to the host of the debate, microphones will be live only for the candidate whose turn it is to speak in muted when the time belongs to another candidate. candidates have two minutes to answer questions, two minutes to rebut and one minute for follow-ups or clarifications. putting the spotlight on pennsylvania once again. that's your brief. >> not even seven days away. more from danny in 30 minutes time. up next on the program the tax policy glitch. >> we ensure the wealthy and big corporations pay their fair share. we will tax capital gains at a rate the rewards investment in america's innovators, founders >> and small businesses. the conversation around the corner. good morning. ♪

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jonathan: live from new york city, welcome back. at could futures on the s&p 500 just about unchanged. in the bond market yields aggressively lower, a move of 10 basis points on the front-end of the curve in yesterday's session things are moving softer. the 10 year 37684.

under surveillance, the policy pitch. >> ensure the wealthy and big corporations fair their fair pay their fair share. we will tax capital gains at a rate that rewards investment in america's innovators, founders and small businesses. now compare that to what donald trump plans. he plans to give billionaires massive tax cuts and to cut corporate taxes by over $1 trillion even as they pull in record profits. we know how to count. >> donald trump speaking at the economic club of new york later on today. his fiscal policy plans coming after kamala harris unveiled the 20% capital gains tax people earning $1 million or more. paving the way for president biden's embrace of 39.6% wealth tax. widely considered to be a potential treasury secretary. good morning sir. thanks for coming in and thank

you for being with us paid why do you think that is a bad idea? the capital gains tax? >> look, kamala harris is an economic illiterate bread donald trump tuna take questions, she's reading from a teleprompter. let's just review here. capital gains tax would be after proposed tax on unrealized capital gains which in the scheme of the new taxes has to be one of the worst tax ideas in 30 years. jonathan: let's talk about how the former president might add onto that, what are his policies? scott: you're going to hear --, the, a warning to harris biden administration cause greater inflation, vice president harris was the tie-breaking vote on both spending bills that led to

inflation. the inappropriately named inflation reduction act and the american rescue plan, they would not of past without her signatures. i'm still not sure she knew what she signed but she did sign it and all these policies she's talking about now are going to you know, ignite inflation again. what happened last time was we had a demand shock from government spending that was met with higher levels of regulation and that's a recipe for inflation. and trump 1.0 we got a -- demand shock from the private sector fueled by tax cuts and that was met with deregulation and that's why we had not inflationary growth. president trump talking about that again, talking about energy dominance, talking about not only stopping inflation rate but getting prices down which i think was very important for the american households and

affordability crisis and he is going to -- address getting the deficit down. we are at 7% peacetime non-recessionary deficits and it is clear now, i think i said it last time when i was here i've been saying it for about two months that the economy is slowing dramatically. annmarie: how do you get the deficit down when you look at drums policies proposals a corporate tax or to 15%, campaign is floating excluding social security payments from taxes. exempting tax on-tipped wages. also increasing the child tax credit. all of this is going to add to the deficit plus tariffs with some economies say is inflationary. scott: let's -- let's unpack that. there, would be income from the tariffs so, that is a big number. annmarie: that's debatable, some say it will be passed on to consumers. scott: well, all taxes are

passed on to consumers. what i think is inching about taxes is they aren't necessarily inflationary. there one time administration price adjustment. historically, 40% to 50% of any -- upward impulse is reflected in the currency so, that would offset it and we have the various preferences by consumers, it could end up in four manufactures margins, they could go down. and the elasticity is consumer behavior could change. in terms of getting the deficit down, i -- i have been talking about it before, we would freeze domestic programs and certain events paid if you look at the harris biden proposals, she hasn't walked this back yet, maybe she will. they are calling for a 21% decrease in defense spending. i cannot imagine a worse time to do it. the only thing that i believe,

and again i don't speak for the campaign, but the only thing i believe that should have a real increase is defense. -- the inflation reduction act is the doomsday machine for, the deficit. it was originally scored at a positive score, it was supposed to be positive 50 billion. then it went to 300 billion it will probably be one trillion this year and is now estimated over the life of this thing to be 4.5 trillion on the deficit. lisa: does that mean you expect i'll trump to unwind it? scott: to halt it. lisa: but not unwind it? scott: i'm not sure -- you knocking a level the charging stations. lisa: this is the reason why you had the congressional budget office, out saying donald trump's proposals will increase the deficit more than kamala harris's.

we had a story on bloomberg talking about how potentially donald trump's proposal to increase the collective cost over the next decade. how do you offset that? scott: you all know bloom -- bloomberg is one of my favorite venues but i have to say that story yesterday at the 10.5 trillion was poorly written and poorly edited and compared apples to oranges. the 10.5 trillion -- was everything donald trump and jd vance have ever said and they took it to the highest. then they took the score from the wharton school and said this is the harris budget or the biden harris budget. it's apples and oranges. if we were to take everything the vice president harris, including what she said in raleigh, a 25 -- $25,000 for housing including for new

arrivals, that would be substantially in excess. annmarie: but the democrats, and biden budget now and kamala harris administers never revenue increases, whereas of the revenue increases to offset all of these tax cuts the trump is talking about? scott: i think the pay force here. it's the cut spending. we do not have a revenue problem in this country, we have a spending problem. so traditionally the government revenues, a federal government revenues are 17.5 percent to 19% of gdp, we are right there now. since 2000 we have averaged about a 3% budget deficit. so spending has been 21, 20 2%, this administration led by vice president harris has blown out the spending. we are at a 7% budget deficit

right now and what we we have to show for it? we have -- we have employment numbers revised down by 800 or 900,000 jobs, we have 250,000 private sector jobs. so the idea here is what we have seen with harris biden, it is what's called the two footed driving. you've got one foot on the accelerator, the fed is putting one foot on the brakes. jonathan: i don't want to cut you off such a stick around, scott of t-square group from new york, this is bloomberg. at creative planning, your portfolio is managed in a tax-efficient manner. it's what you keep that really matters. book your free meeting today at creativeplanning.com.

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jonathan: let catch some price action, equity futures positive by 0.1%. on the nasdaq we are just about negative let's call this unchanged. lots of economic data through this morning. initial jobless claims then later on in the morning we will get the ism services read. in the bond market big rally to start the month of september. the to your settles down about a basis point this morning, the tenure up, 370 665 and three days of yen strength can discontinue. dollar-yen looks a little something like this. we are negative .1%, typically we talked to scott about politics given his potential to be the next treasury secretary.

scott we have to talk about what's in this market, i know you've been long gold, you've been longer japanese yen but you are keeping those paid scott: thanks for focusing on my j job -- on my day job. it's an extraordinary opportunity for central banks around the rest of the world and easing cycle. japan, for the first time in a most two decades, is in a heightening cycle. we will see if it only comes out once every 17 years or if this turns into a real hiking cycle. my thought is there is the potential focus to keep going. jonathan: we are at 140 now, pushing through 160 previously. what you have in mind? scott: it's two sides to this. japan is strengthening inflationary impulses picking up, the other side as i've said,

the, the u.s. i believe the u.s. economy i said it recently is buckling. and they are stunning to see it in the numbers. it's both industrial numbers and labor, and i think what is funny here, on the democratic side of the aisle and i'll put politics back in for a minute, they have been straining for a rate cut all year. now even claudia who's been chewing off her arm since february for a rate cut doesn't want to come out and say my rule got triggered and any i rule gets triggered were in a recession. so using the word for november 5. jonathan: the cheaper potentially this deal gets? scott: exactly, they may have through some terrible timing get a better price. we will see what happens. jonathan: walk me through what you think should happen and let's move through their pride biden is given the signal he wants to block the deal.

the company has come out to the wall street journal and the last one he four hours saying if you block the deal, job losses are on the table. we are to be moving out of pittsburgh. how do you recalibrate with that in mind? scott: it was very surprising. i've been going to japan since 1980 nine and japanese companies traditionally have a very high regard for all stakeholders. arm of the first time i went talking about shareholder value, we have our customers, our employees, we have our banks and community and the shareholders relaxed. and they reversed that putting shareholders first. and i was surprised to see a japanese company that did not check in with the u.s. stakeholders. i did not check in with the community, they did not check in with the unions. they did not check in with the customers. jonathan: now we've got to deal

with the policy and the campaign trail are we going to offer them state aid. how do we keep this in business that doesn't end up in job losses. >> may be the deal will be resurrected. forcing their hand with their bid so may be a domestic buyer will come back. jonathan: you don't see space for state aid? scott: well, i don't see why we need it right now. we did state aid with intel and intel just laid off 15,000 employees, of the stock is down this year and they will probably pushed out. >> scott it's good to see you, nice to touch on markets. let's do that again next time. we like your day job as well. equity futures on the s&p 500 positive by 0.1%, its case in top stories under surveillance, president biden preparing to block the takeover of u.s. steel

with a decision expected as this week. despite u.s. steel responding in intends to explore possible options under the law to ensure the deal goes through. the stock is bouncing by 2.4%. donald trump is set to detail his economic agenda. the trump campaign anger public a nominee intends to cut wasteful spending and increase energy production to pay for the $10.5 trillion interest in tax cuts. they will cost a lot of money. >> it feels a get oprah winfrey with tax cuts, everybody seems to be getting some sort of tax advantage preyed how are they going to pay for it? scott they're saying potentially tariffs. is that going to pay for this 10 point $5 trillion potentially of tax cuts. we also should mention the harris campaign is also talking about some of these tax cuts for those making under 400,000. she is sticking with some of biden's ideas of raising revenue

at the top. >> we can have a debate about this in the -- agreeing to an agreement over the rules for the first and only schedule debate set for next tuesday. harris reluctantly accepting the microphones trump saying wednesday he plans to allow harris to speak without interruption. lisa: by to factor since the microphones will be off. how much do we get and how much will this be who has a better vibe because we've only gotten vibes for the most part since a lot of the proposals we've heard about a mostly dead and the water to bending on the composition of congress. to me this will define whether you have kamala harris as the underdog candidate or not. whether you have donald trump still very much the preferred winner by a lot of companies, this will be a really important seismic moment at a time when people can already start voting. that cannot be lost. jonathan: two key data points at the fed september decision

taking off of payrolls tomorrow in cpi next wednesday. housing costs a concern for many including the former secretary of housing and urban development shaun donovan. the current president and ceo of enterprise, unity partners paid thanks for coming on the program. let's talk of the scale of the fort ability price -- crisis. are we finally coming out of the other side of this? >> i do not think so and it is getting worse in places. i have been doing this work a long time about 30 years and what is different is two big things. first, it is a problem that steeper than it's ever been. the biggest rent increases we've ever seen. we have a doubling in what it costs to buy a home in the last three years to buy a home. it used to be on the coast and are bigger cities. i was in boise, idaho last week and they have a housing crisis. so it really is everywhere. it's also driving our economic

challenges in a way i've never seen nationally. our inflation problem is a housing problem. we have companies who cannot attract workers and it's driving down economic growth. half -- half of our workers are paying 30% of their income which is unaffordable. that's $8,000 a year they can put toward groceries, consumer demand. it is at a different scale and it is in our presidential campaign right now, 33 governors across the country talked about housing affordability in their state of the state address. it's a different crisis than i have seen. it is moderating from covid but at a level that is unlike anything we've seen. jonathan: i will ask a dumb question and you can give a complex answer preyed are 200 basis points from solving this crisis? shaun: absolutely not because we are 7 million housing units short of what we need. this is a supply problem not just a rates problem. and that means we have to take

action in many different ways both on-demand and on supply. >> when you listen to the campaign trails both of these sound populist in nature when they talk about the housing market. say first-time buyers can get 25,000 dollars, a benefit to help them. don't you think that would exacerbate the problem you see right now? >> let's be clear, harris's plan does both. it focuses on supply, it looks and overregulation, it looks at the need to encourage states and locals and require them to build more. but we also have to recognize that for a family, of the real struggles are for families who can't even put food on the table and so we do need to figure out how to help people afford housing more or were never in a bring that cost of housing down. that's really, you have to have a balance. annmarie: this will be done in

congress pre-how could you see a divided congress get to any resolution on something like housing? shaun: this is what so interesting on the politics have changed on housing. i've been in boise, idaho and montana the last few months, red states, blue states, all give you another example. we had a tax bill that made it through the house of representatives overwhelmingly. the most bipartisan thing seen. there was a sniffing increase in the best pricing vehicle we have to avoid -- 244 -- afford housing. this is different from what we've seen in the past where there is bipartisan support around housing and i think in the tax negotiations you will see a big increase in the long-term housing. lisa: as these policy discussions continue and will presumably take some time if the federal reserve cuts by 200 basis points the next 12 months

will that make the home affordability crisis worse or better. >> it will definitely help, it's great not just for homebuyers but for builders out there. and so that will be important. i want to go back to the fundamental problem. for many years we've been relying on building housing and the supply problem has got to be focused on if we are really into get to the solution. >> you talked about how this is a problem that's widespread. at widespread globally and cities across the world are dealing with this affordability crisis and a lot of people are saying it's because of how low rate scott and because a lot of people could leverage up their home purchases leading to higher prices. why won't lower rates just do that again? you've seen a homebuilders tilting as fast as they have in a long time during the pandemic during high rate times. who's to say they will keep up?

shaun: we have to recognize housing is a financial instrument, but you cannot build it if you don't allow zoning to build that. in a neighborhood where a community is saying not in my back yard, i don't want anymore housing. there are different measures of it. harris's plan says she would add 3 million units, our numbers are for real affordability we have 7 million units shortage so reits are just a piece of the issue, it fundamentally what we allow to be built and how we for the lowest income people, how we support them to do that is critical. jonathan: you're an expert on this with a lot of experience around this table. harris is offering two things ones to incentivize building but also support back. we also understand is a mismatch of the time horizon for those to bear fruit. you can support biden that works immediately. the supply issue will take years to play out.

in the near term don't you risk i prices with these policies. >> you have some risk but understand for the family that is right now spending half of their income towards rent or toward something, that increased support might mean they put more food on the table. they do other things to support their family so it has some effect and risk to what you're talking about but at the end of the day we know we have to do both, we have to support supply and demand. you have a consensus ordering the country on democrat for democrats and republicans that we have to build. here in new york we have a city of yes proposal. in montana they passed legislation saying cities cannot restrict housing development in certain ways, so that is a growing momentum. it will take time so we better get started. >> how long is this problem been building four.

we could give you a big picture opportunity. you are part of the government coming out of the financial crisis, the housing crisis of oa, 09. where the problems now were the seeds planted back then, the lack of supply. how connected are these issues. >> this has been a chronic problem over decades, housing affordability 50 years in this country. but it is really becoming an acute crisis through covid. covid gave it a jolt of adrenaline in terms of problems. i want to go back even before the obama administration. given we are on bloomberg tv i was mike bloomberg's housing commissioner and new york city and this is a huge focus for us. rezoning them, right now we have one billion square feet of empty office space around the country, that's an opportunity to think about. absolutely this is a problem that's been building but it is different now in terms of what we saw during covid.

those people who used to work in an office now working at home. they're demanding more space at home so we have a demand that's grown in norma's lead during covid that we have to meet. jonathan: this was super smart and i look forward to doing this with you. shaun donovan of enterprise community partners, blessing the opportunity for stories elsewhere with your bloomberg brief. >> the nikkei reporting the japanese owner 7-eleven saying its offer price is insufficient. the canadian company launched a takeover approach a little over two weeks ago. they are also expected to tell -- tell them to reconsider the price. matt damon and lin-manuel maranda will hand line a campaign fundraiser for vp kamala harris. an invitation obtained by bloomberg shows the dinner takes

place on september 18 in new york. tickets are going for 25,000 dollars a person. harris's campaign has been leaning on celebrities trying to expand her cash advantage over donald trump. olympic break dancer rachel gunn has apologized to the breakdancing community pretty rose to viral infamy for her routine where breakdancing made its debut. she showcased moves such as the backwards role, of the kangaroo hop in different contortions of her body on the floor. ring interview she said she is very sorry for the backlash the community has experienced due to her performance. breakdancing will not be in the 2028 e olympic spring -- olympics. jonathan: i felt like it was very inclusive, i felt like i could replicate the moves. lisa: in fact my children did replicate the moves. jonathan: up next on the program, both sides point to rate cuts. >> we've been on the hunt for a

while for the fed to get started on its rate cuts. they're too restrictive given the slowdown we've seen this year. jonathan: lisa is doing the moves. lisa: it's one of them. the kangaroo. from new york, this is bloomberg. ♪

jonathan: equities just turning lower a touch. down on the s&p ended in the bond market, yields higher. we bounce back a single basis point. under surveillance this morning, all signs pointing to rate cuts. >> we've been on the hunt for the fed to get to this. we feel they've been too restrictive given the activity we've seen this year. it's more likely we'll see 25 basis point hike but a bit more forward guidance with regards to

how they are seeing this evolve and what might cause them to get more aggressive. jonathan: traders looking ahead to a double dose of labor market data with adp payrolls and weekly jobless just around the corner. ed writing the fed put us back one of the key unknowns is how the economy will respond to the fed executing rate cuts. if the pass-through into the real economy is slow the fed may find itself behind the curve again. good morning and welcome back. you said in your recent note the description of outcomes, how broad of the range of outcomes right now? ed: labour -- ed: if you look at we are pricing well ahead of 100 basis points. if you look ahead, the probability that funds manages to stay around 4% is close to zero. it's a fantastically broad distribution at the moment and broader every week. jonathan: it wouldn't take much weak economic data on those bets

that if we dropped 100 k tomorrow morning and unemployment stays at 4.3% we start pricing in a series of 50 basis point cuts. if you are facing these outcomes and the range is like this when you can drive a truck through it, you chase this rally? what do you do with this? ed: we have had a strong rally so far this year. i think what we want to do is take stock that the starting level of yields is quite attractive. that the curve is likely to continue to steepen versus what markets expect. so that gives us a little bit of juice. at the same time you do not want to be maxed out, you want to leave dry powder for one environmental risk surprises to the upside. lisa: hearing the likes of howard marks say the neutral rate in this new environment is something like 3% to 4% if we look at this wide spectrum of outcomes you see an average rate below 3% by 2026. you think that is maybe

overestimating the chance the fed gets down to close to zero again? ed: i think there is a really strong probability that happens in the coming years. that the data deteriorates to the point where unemployment starts to feel itself, get those dynamics. i think fed research does continue to point to that probability being high in the coming decades. will it happen in the course of the next 12 to 24 months is anyone bet -- anyone's bet. we have us a giving in my fiscal uncertainty for a stall in recession. but in the dynamics there, fed funds going back to zero i think is very reasonable. lisa: there's a pretty profound extrapolation which is essentially this is not a different environment than pre-pandemic. it essentially this is not a more inflationary time but we

were in 2019 and 2018 and flies in the face of what investors are saying including some big ones. and you explain why you think so? ed: the large part of the inflation story, this goes back to the mid 90's is driven i anchored inflation expectations. we run this massive experiment over the course of the past three years, the extent to which those form a center of gravity that pulls inflation towards 2%. i think it has played out well. it underscores the fed's credibility in maintaining that level. i don't see any reason why inflation should be different going forward unless the fed strategy changes. inflation at the end of the day is a financial variable determined by the fed. lisa: if the fed cuts by 50 basis points and then 50 basis point again at a time when the economy is not falling off the cliff, could that cause a higher inflationary environment? ed: we will find out.

it means the economy will be very sensitive to rate cuts straight out of the gate. 100 basis points of cuts could significantly accelerate growth and then we are knocking to get the fed funds below 3.5%. this is a key unknown. we don't know at this stage. jonathan: you have to realize how finely balanced things are going into tomorrow morning. we are one bad job sprint away from pricing a series of 50 basis point cuts and one good one away from repricing what we put in the past few weeks. lisa: we don't know what the response of markets will do to the underlying economy. we talk about how this isn't an interest rate sensitive economy on the way up. what's to say it will be on the way down? jonathan: should i feel that this inversion? when the curve starts to normalize typically that means bad things are happening in the

u.s. economy. the rate cycle is just about to start or is happening. could be different this time? ed: not as much. in the curve i see over the course of the past 12 to 24 months the curve is deeply inverted signaling they are taking it to a restrictive place. they are taking their foot off the brake pedal right now when the curve is dis-inverting. you had your previous guest talk about the sensitivity of the housing market to those interest rate cuts. it's a key unknown. if in fact we see the housing does not come back on the flipside it will potentially corporate we accelerate. the fed will have a really high floor today. jonathan: as always, thank you sir. he is right, we still don't know whether those rate cuts will unlock a ton of inventory, push out supply or whether the actual

impact will be on demand. we don't know if prices are going up or down on the back of these cuts. lisa: we don't know what the circumstances are and what the data will be paid how much is priced in and the interest rate sensitive loans consumers take out. how many more of those could get extended by virtue of rates coming down that's not lost focus. it leads more directly to inflation. jonathan: futures currently slightly negative on the s&p 500, the third hour looks like this. we catch up with tim of wolf research, j price of well search and kathy jones of charles schwab. from new york, this is bloomberg. ♪

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>> we think rates at the current levels are too restrictive given the slowdown in activity we have seen this year. >> we are not expecting a collapse but there's no doubt the consumer is slowing. >> wages are growing.

>> we shouldn't be surprised by this. >> we do see slowing going forward. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: the third hour of bloomberg surveillance begins right now so let's set it up, eight: 15 eastern time and adp jobs report. 15 minutes after that, jobless claims and 90 minutes later, we get the ism services print, three key data points into the payrolls report tomorrow morning. lisa: it's the key test of how strong is this fed put. how much will people look at any bad news data is seriously problematic and any good news data is being good, not necessarily advocating with the fed is poised to do. to me this is sort of what has been behind this broadening out. annmarie: also on what ed just

set a moment ago basically if the fed, if all its pricing is 100 basis points, is there a chance of the fed were to do that that we accelerate growth and have this concern about inflation. this is still a debate for some members. look at what bostic said yesterday the fact loosening monetary policy is a dangerous gambit. at the same time mary daly is saying we must protect the labor market at all cost and is not sure whether it's 25 or 50 but she is there. jonathan: we often talk about market pricing and how much repricing and for september and beyond. if the aggregate, the average. the massive broad range of distributions and this is ultimately what he's talking about. saying if we get a bad print here could be pricing in a series of 50 basis point cuts just like that. you get a good one tomorrow morning you're reversing pretty much every thing we've been pricing in over the last couple of weeks, that's how finely balanced everything is when they've said repeatedly they're not data point dependent. lisa: we also don't know the

answer to a lot of these questions such as what is our destination, how inflationary is this economy, how responsive is this economy to rates at a time when people were surprised it did not fall off a cliff to how high the fed raised them. they are all fundamental questions, we just do not know the answers it is the reason why fed officials aren't giving us much guidance because they don't know either. jonathan: data drops in about 13 minutes. mike mckee will break that down for you in a moment. equity futures on the s&p a little softer down in the bond market, yields a little higher. up a single basis point. coming up we will catch up with kate of russell investments as market awaits next batch of labor market data the bid for u.s. steel all but collapses and kathy jones of charles schwab on why all roads lead to lower yields. we begin with our top story, stocks steady ahead of more labor market data.

claims coming ahead of august payrolls tomorrow morning. traders looking for evidence the fed has stuck the soft landing. the fed -- the inflation problem is largely solved at this stage, expect you will hit the 2% explosion target in early 25. they have the space to be aggressive if needed on rates. weeks pecked a soft landing but cannot rule out the possibility of a recession. good morning to you. >> great to be here. jonathan: let's start with payrolls and the data for the next hour or so. what are you in the team looking for? kate: maybe on what we saw in july. if we get something close out we think the market we can to see some of this broadening out. any chance we are below 120 or 100 that's where we see volatility. talk to me about where that would leave the bond market tomorrow. >> i don't think the bond market

is moving tremendously unless we see the labor market show more signals of a weakening versus a normalization and potentially you start the recession discussion to be more prominent pre-we are not there yet but we see some challenging prints in terms of labor, that's where you see those. >> this is interesting to me. you think this is a symmetric response. but people are not going to unwind what we've seen in terms of bond rally in the market. it gives you that conviction? kate: the first 100 basis points weather drips into next year is kind of easy to get to. the 200 or so being priced in through the end of next year is where you might see some movement still, but you still end up having a while ago to get there so i think if we get some good news the labor market more normalizing there's maybe a little bit of them issued that the fed is still moving to focus on the labor market not inflation that you don't end up seeing a big shift back up in rates because we know the

direction is pretty clear. lisa: we were talking about the volatility of markets at a time when there's somebody unknowns and doesn't feel like one data point could really tip the scales in a pretty sick and way do you basically view bad news is being a buying opportunity. if you end up seeing some really problematic print, can you say you look at the fundamentals and these companies performing well. time to buy. >> it's great to see volatility in the market and the market reaction. the challenges the market is overreacting and so we are staying pretty close to home in terms of the strategic allocations. if we see those overreactions we are leaning into that. it tends to be more trimming are winners print even when rates have moved over the past periods we've been trimming. if we see a big selloff we will be leaning in. it's more because of the overreaction we see from the markets because of the volatility and the uncertainty.

markets are trying to find the narrative. when you see trimming in the bond space. are you saying the market is priced into many rate cuts. >> we think the magnitude right now is at the point where it's as much as it's going to go unless we see a recession theme start to pick up so we've started to trend some of the positioning. >> check out this tweet. if the fed was unburdened by what has been, and if the fed had a blank sheet of paper to begin with their public set fed funds run 4% instead of where they are now. the signal that they send cutting by 20 to 525 to 550. can we play that game. if we were to have a blank sheet of paper at the federal reserve what with the rate be today? >> we are about 100 basis points off-site of that. >> the first 100 basis points is easy to get to see don't see as much in movement.

there so try to figure out the magnitude of how far they get paid >> we've heard that a number of times. so to conner's point what is this performative chatter about, this signaling for 25 versus 50. if off-site get a move on. >> is in the fed and this is not meant as a pejorative but isn't the fed performative in its trend, isn't this the signal that they give to markets. so a certain point it really goes to the question of how you trim positioning, how do you understand whether they are on a trajectory that's much is speaker akin to what was said that they can go back to zero versus between 3% and 4%. >> that's where you don't make any kind of severe moves because there's a lot of uncertainty and try to take advantage of the volatility. jonathan: busy 24 hours for you and the team. thank you. kate there of russell investments. welcome, equity futures are softer.

we are down on the s&p 500 just a roadmap for the next 45 minutes or so. about seven minutes we get the adp jobs report. doubles claims 15 minutes after that. adp had a question earlier this week i've been leaning on this a few times. i've been asked whether adp is more important than payrolls this week because of the revisions we had a few weeks ago. to payrolls and maybe dare i say perhaps it's a question not a statement, perhaps may be we ask the question is it more credible than the payrolls report this week. >> how can you back away from a statement before you say it. that's what we heard from a lot of people. i've heard a lot of people saying the same thing that adp has been more on par taking into account some 880,000 jobs that were removed from the year of job gains through march. it's a valid question, the point being will you see more reaction markets than usual. stay tuned in six minutes. >> it's a great tease.

>> let's get an update on stories elsewhere pretty or should bloomberg brief with dani burger. >> french president emmanuel macron has picked the country's next prime minister. the senior conservative figure in the eu's former brexit negotiator by choosing him macron is opting for someone who largely avoided the bickering of contentious political environment in france as of late. he faces the immediate challenge of forming a cabinet that could bridge the rift between left, right and centrist blocks and parliament. jetblue shares moving higher in the premarket trade more than 6%. the carrier raised its sales forecast for the current quarter, the results are in part thanks to passengers who re-booked flights that had been canceled by rival airlines with an errant crowdstrike update causing industry outage in july. third-quarter revenue will be between 1% down to and a half percent. with prior expectation was as much as a 5.5% decline.

shoe carnival reporting second-quarter earnings, gaining 3.2 percent after narrowing its forecast by the back-to-school season momentum. >> over the last year things have settled out but they haven't in any way pulled back in a meaningful manner. i know that's inconsistent with what you've seen across the broader markets so i think in part that's due to the innovation we are bringing in our brand to the market, but in terms of a major movement we haven't seen that yet. >> also different than the wider market, sketchers says it sees opportunity in china. >> thank you very much. compare and contrast that with what we see elsewhere from companies suffering and struggling in china. lisa: that was shocking to me and they were not alone. talking about how they rc in opportunity to expand in china when you talk about tariffs we

talk about things like that, but this is a pretty big market and they talk about how they have local businessmen running their businesses. it just doesn't seem to be moving away from that materially. >> giving away sketches of the conference? >> i asked the sketchers cfo how you make them cool. >> what lisa: was the response? lisa:lisa:lisa: he also has teenage kids. they ask the same questions and he started talking about innovation. >> you can tell us what they really said. >> up next, to move will research as nippon steel goes over you -- go as after u.s. steel. they had a major roadblock in washington dc. and a report from new york, this is bloomberg. ♪

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>> the economic data begins in a few seconds we given adp report then after that the jobless claims that the big one tomorrow. the payrolls report we are looking for a number, the median estimate in our survey your scores going into the data negative on the s&p by almost 1/10 of 1% softer bite one third and into the losses of the last couple of days kicking off september for the equity market bowls. we turn to the bond markets we get a downside surprise. yields are dropping to 373 on the two-year. lisa: the wrong kind of downside surprise unless you're betting the fed will cut 50 basis points because you got 99,000 jobs according to adp created in the

private sector during the month of august that's far lower than the 135 anticipated. we got 145,000 total -- 114 thousand total jobs from the government and the expectation has been that would jump up but it has not jumped up at least not in the adp numbers. adp is revised down their july numbers to 100 11,000 from one under 20 2000 so definitely disappointing number and given the fact we have seen markets react to much less jobs data, a lesser jobs data this week i would imagine this will stir some folks. jonathan: not too much drier but we are looking at futures a little more than 1/10 of 1% on the s&p. yields are higher early this morning. switching on the board going to the two-year, we could see a sneak peek of things of the curve down to 37373 and foreign exchange dollar-yen around 14313.

but there are some people out there wondering whether adp is a better signal of where this economy is at compared to payrolls which got revised so heavily a few weeks back. >> adp has revised a lot. we just don't pay attention to it. they drop their numbers to 111,000 after the government report came in, so it's probably not valid to say it's more accurate. plus the fact were looking at that, that will get revised again. this happens every year, bigger magnitude and when you get turning points in the economy you see big new magnitudes of changes like this. so it's not a surprise to statisticians and economists. i can see why wall street is concerned about it. interesting thing in the adp report is still saying manufacturing losing jobs. they have been saying that for months and it doesn't happen. so we see if that happens this time. professional business services,

something economists a been watching closely down 16,000 in their survey. these would sort of portend problems if we get the same numbers in the payrolls numbers. lisa: we throw around these numbers were expecting tomorrow somewhere between 120 and 180,000 jobs added. this question of what it means to be good, what is the appropriate number of jobs being created and should it be higher now than say 10 years ago or six years ago given how much bigger the economy is. michael: we've gone back and forth about what the level of job creation needed to absorb in the labor force is per the fed has looked at somewhere around 100,000 or above but that's not a number wall street will find acceptable. it becomes a matter of not with the level is but the speed at which it has decelerated it

would scare the fed if we got 100,000 this week they would say that's not a terrible report on a statistical basis, but because it happened so fast that we fell off that that suggests the economy is deaf >> -- >> on a statistical basis we got 100 k tomorrow morning. >> i have no doubt economists -- lisa: hold on a second. i have to respond to that there are people who say it should be closer to 300,000 jobs created, that actually was normal what we saw based on how much bigger the economy is so we don't have a sense of what's tight and what's not. i think that's compelling. >> i'm glad i was able to help. the estimate was 145. equities negative by 0.0 per we

are down on the nasdaq 100 talked about that into the bond market. the dollar is weaker, 1.43 on the brink of breaking that level. time now for some morning calls. downgrading dollar tree, of retailers disappoint second-quarter earnings report was the final straw. pointing out competitive issues. not issues around the consumer, competitive issues, execution problems. next up barclays upgrading nordstrom to equal weight. the proposed billion-dollar deal and the nordstrom family to take the department store chain private. that stock is up and finally wells fargo upgrading roku to equal weight. seen potential in the channel service and strong revenue growth ahead. positive by more than 3%. to maintain -- back in august

saying the best odds for a takeover approval were under a possible harris administration adding the japanese ownership is the best option -- as the company will likely shutter if the deal falls through. thanks for being with us, you broke ahead of the news in last 24 hours how things changed for you? how thing shifted? >> there's no denying if president biden were to's total the deal it's a done deal. it's hard to combat. it's very unusual. and it wasn't really in our base case but at the same time it's not done until -- i do think this could be very aggressive negotiating tactics and unprecedented perhaps. i think the alternative to the union is likely losing jobs. so i don't understand the outcome here staying with u.s. steel. >> are you saying this might not be a bio -- a viable business? >> there some assets union owns

it would be shuttered if this deal does not go through. they have other assets they prefer they've invested in and ignored the union a bit which is part of the beef with them. but they would shut union jobs very clearly in the next several years of the >> deal does not go through. >>you think there's a case to own u.s. steel even if this doesn't go through? >> so much focus on the deal has gotten a different kind of investor in the space but if you look at fundamentals and say even on our pretty challenged price outlook you look at them giving a steel discount, stocks are 35 to 45. they are starting up new capacity but will allow them to actually outperform in terms of volumes so that sets them up a bit differently and assuming they execute which they will print >> how do you make sense of the timing logic of them coming out with this deal at a time it's clearly politically fraught? timna: i don't think it was

clear, it was a year ago and i think clearly the purchase bins underestimate the end of this. if you look at the steel industry, it's 5% owned. there's quite a bit of foreign capacity over the years and u.s. steel did a very public process that was endorsed by their board etc.. i think everybody just underestimated how much this will get politicized given the states they operate in our states that her tossup in the election. >> why not do more to get the union on board. >> i feel like they did a lot. they came out this week and said they would commit to a sizable investment. so they would keep those assets running, i thought that was a pretty bad statement. the union if you like the protests have gotten milder and milder. i do think we were moving in that direction getting closer to finalization.

we will see. i think they tried and maybe there was a cultural barrier. jonathan: we've talked so much about u.s. steel and not enough about nippon steel paired where also they looking? >> they be blocked from the u.s.. timna: japan is a melting ice cube in terms of any factoring capacity and they've been losing that principally because china is oversupplied in the market but they've been losing their automotive business which is all migrated to the u.s. so they are following their automotive customers so that seemed like a natural transition. i don't know this national security in a way. >> have you got one, does this go through after the election? >> if it goes through it goes through. jonathan: 50-50 still. timna: above 50-50 it seems like below 50-50 that's all i'm good essay. jonathan: thank you. it's a tough one. how their campaigning is one

thing. thing a lot of people wondering why didn't they just wait until after the u.s. election. lisa: they started this process a year ago that's how long this takes. and they didn't consider the fact it's a swing state. what company is coming in saying is it a swing state. they should have, it's purple paid what you're thinking. >> if you're just joining us welcome to the program. jobless claims about five minutes times with the adp report a little bit earlier this morning. coming in with a downside surprise. adp lower than equity futures on the back of it. a bit of a delayed reaction down one third of 1% down by 0.7 on the nasdaq. checking out the bond market down three or four basis points. we've got tens at about 373 so we've got a positive sloping yield curve. up a basis point or two. >> to you yields back the lowest

we've seen as people price in the possibility of a bigger rate cut. adp takes a while for people to realize they have to care about it and that's what you're seeing now. jonathan: other people follow. does adp really matter. the anxiety around the eight -- around this continues to build pride let's see if they continue to put a lid on some of that anxiety. jay bryson of wells fargo joins us alongside kathy jones of charles schwab. this is bloomberg. ♪

jonathan: one down, two to go. adp downside surprise. jobless claims coming out later. then it is i later this morning. on the back of that futures are softer, down a quarter of 1% on the s&p. in the bond market, the rally continues after a strong september. yields down by four basis points at 3.71. jobless claims and mike mckee, the right kind of downside surprise. mike: jobless claims fall. 227,000 after 230,000. this was for the last week of august.

continuing claims at 1,138,000. that falls as well. overall, the jobless claims numbers are pretty good. looking at the unadjusted data, jobless claims totaled 189,389. unadjusted data, a decrease of 3300. we are not seeing layoffs. this gets back to yesterday, the beige book, where you sent over and over again, districts were reporting companies saying they were holding onto workers but not filling jobs via attrition, not filling jobs to expand, just kind of sitting with what they have got. it looks like that is definitely the case between adp and jobless claims. not letting people go but not adding people either. jonathan: this market is so finely balanced on a knife's edge. futures briefly turn positive on

the s&p 500. yields were a little bit higher going into adp. downside surprise, bond starts to rally, yields up by four basis points. now we are down only two basis points, 3.73. 30 minutes ago, we all said this is how finely balanced things are going into payrolls, one print away pricing in 50 basis point cuts, seemingly unwinding the moves from the last month or so. lisa: the lack of clarity in the economy is unprecedented in many ways. i keep thinking about this, mike, i love your take on this. how big the delta is between not hiring a lot of people and actually firing people. it seems like even in the beige book, people are not hiring as readily unless they will replace a role. how connected is that to a step of laying people off, not in a linear trajectory, but very

predictable trajectory? mike: definitely semi-predictable trajectory in terms of when you go into recession. first thing you do is cut back on workers hours. we will be looking at that tomorrow to see if hours worked cuts back at home. you cut back on temporary workers. we saw that in the adp today with professional business services: by 16,000 jobs. those are signs that things could be happening. but everything has been so weird since the pandemic, as we have been saying. people wondering, are we normalizing because we had such a strong labor market, or are we going down and the fed needs to take emergency steps to stop it? row in two other factors, one, it's september, so the market is primed for bad news. every september the market goes down. they are looking for things to get upset about. then you have the election.

people are saying we are waiting to see what happens with the election before we make any business spending plans. all that together, you can imagine sitting together at the fed, trying to balance all of that out, deciding what you will do. jonathan: we have said for months, ask the question, are we seeing a welcome calling or unwelcome deterioration? after chair powell's speech, i wonder if that is a distinction without a difference for the. he said we don't want any calling at all from here. if you get any signs of calling, just setting them up for action, isn't it? mike: it will be interesting tomorrow because we have john williams, chris waller, the intellectual center of the economists on the board of governors, we will get their views after the jobs number comes out. williams is actually speaking as the number comes out.

i hope the folks at the council on foreign relations have the bloomberg on their phone. to ask him about it. it is their last chance to send a signal. the blackout starts saturday. if they are read and don't want the markets to over react one way or the other, they will hopefully tell us. jonathan: we have all got it circle, governor moeller, tomorrow morning. lisa: i'm laughing because of john williams, two speeches. one of them, good job report. the other, bad job report. two edits. maybe that is how we will get message. jonathan: just start scribbling out methodical and gradual, just take out those two words. if you missed the last 20 minutes, we had the wrong kind of downside surprise on adp, 99 versus an estimate of 145k.

the right kind of downside surprise on jobless claims. i said earlier if you walk into a room of economists, you would walk back out confused. you are not getting any clear direction either. jay bryson is challenged with solving some of these issues. what is going on in the labor market in america? jay: i think you kind of talked about it before. when we are seeing, we are just not getting as much hiring as we had before. that is consistent with the adp number we got this morning. we are also not seeing businesses lay people off. we are consistent with the initial jobless claims number. the labor market has moved back into better balance, which is a good thing, things are slowing down in the labor market. lisa used the word earlier, you are on a knife edge now. you don't want things to deteriorate further from there. jonathan: what gives you

confidence it won't? confidence that this stabilizes, that this is an end state for the rest of the year? jay: two things as things stabilize here. recession is not the base case call. you look at the financial position of households, in general, it is pretty good. yes, we have seen the liquids sees go up on credit cards, auto, anecdotes of low income of consumers feeling stress. if you look at the debt situation, and debt service ratio of consumers, it all remains pretty good. the same applies to the business sector in general. writ large, don't really have to lay people off in aggregate right now. those are two good things. let's take a deep breath, things are not falling apart out there. continuing expansionist still probably the base case. lisa: let's say the base rate is

100 basis points slower, companies had an easier time borrowing at a more reasonable price. would you start to see a pickup in hiring based on the fact that companies are still hopeful? the reason they have not been more aggressively hiring is in part uncertainty around the economy and the election? mike: i think that is part of it -- jay: that is part of it but you look at the overall economy and you see softness. the housing market has been sought for a while. manufacturing has also been soft right now. the only real thing that is holding up the economy right now is the service sector. when we get the ism number at 10:00, that will be important to tell us what is going on there. as rates come down -- the point is, that should help to stimulate things. there is some uncertainty,

whether it is toward the election, economic outlook in general, but what we are seeing is monetary policies, restrictive stance. rates need to come down to help stimulate spending. lisa: is this normal to have this level of uncertainty? this idea that things could tip the scales one way or the other? is this how it always feels, tipping points one way or the other with such model data? jay: there is always uncertainty out there. you look at the pandemic, very fast-moving situation. financial crisis, lots of uncertainty around there. absent a major shock, and the last major shock was the pandemic, on monday from that -- unwinding from that, i am hard-pressed to think of a time in the last few business cycles where things have felt as uncertain as they do now.

i think it is not normal right now given where we are, but unfortunately, the nature of the way the economy works, overall geopolitical situation works, there is always a base level of uncertainty. annmarie: you said earlier not much hiring, not much firing, sounds goldilocks. but hours work will be important. what kind of hours worked would you need to see to be concerned that potentially the next point of call will be layoffs? jay: if we are seeing aggregate hours worked tomorrow going down , let's call it 0.3% or something, then i start to get concerned at that point. mike had a really good point in terms of the hours worked. the first things that you see are temporary workers starting to go down. 24 out of the last 26 months, we have seen the number of temporary workers going down.

if we start to see hours worked going down, by that magnitude, 0.3%, then i start to get concerned. jonathan: thank you for many at wells fargo. the team at wells fargo looking for a half decent jobs report, something around 150 is what we are hearing. bank of america looking for 200k. citi looking for 125. there is a spread in the estimates for jobs of about 75. that is about the size of the average reduction and revision of the last 12 months. the difference between 25 and 50 is about the size of the average revision over the previous year. lisa: also the difference in views for those that call for a soft landing, bank of america, more of a recession, citigroup. it highlights how disparate people's opinions are not just the headline number but how you

read that through to an economy that is still hanging in there, whether it undermines the idea that everyone is betting on a soft landing. jonathan: the 2-year is betting on something worse, at least based on the price action. we have had a move of almost 20 basis points lower on the 2-year. kathy jones joins us now for more. welcome to the program. why do you believe all roads lead to lower yields from here? kathy: the fundamentals tell us that, jon. we had the weakness already in parts of the economy, manufacturing in particular, but also evidence of a slowdown in consumer spending. also you have the whole global picture right now. you have weakness in china translating into some weakness and softness in europe, particularly in germany and manufacturing sector. collapsing commodity prices. that has really been notable in the last couple weeks.

notable for a while but releasing those industrial materials prices come down. then you get to the u.s. where policy is restrictive, the fed has already indicated they would cut rates. what will send the rates higher from here, would be the question i have. all roads seem to point to fed easing, lower rates, disinversio n of the yield curve. lisa: how much longer can they go if you see this as a more inflationary moment than pre-pandemic? kathy: i think the terminal rate -- nobody knows where that is. everyone is guessing. the estimate will move around based on whether bc recession or able to pull off a soft landing. fed funds rate at 3% is kind of a base case scenario for us. it doesn't give you as much room as you go out the curve for yields to fall in the treasury

market, but there is still a substantial difference between 5.5% and 3.25% in the fed funds rate, which is where we think we are going. lisa: we've been talking about how credit markets have been working in tandem with stock markets in terms of continuing to gain, even though there are concerns about a weakening labor market. what data levels would you start to get concerned about credit quality at a time when perhaps there are a number of people talking about this being more pernicious than a soft landing? kathy: we have been fairly cautious about credit, probably too cautious in this cycle, about wanting to stay up in credit quality because of the concern we will see some spread widening. spreads have been so low. we are seeing some widening in high yield, ccc's are underperforming other parts of the high-yield market, so you have some dispersion there. in the investment-grade market,

i would be concerned if we had a real solid recession indicator that came out, negative employment growth, that kind of thing. we have talked about this many times. this is a different cycle when it comes to credit. borrowers have been able to refinance their debt if they need to. there have been plenty of money available to do that, term out the debt over a longer time period. we are not looking at a big blowout in spreads that week they were staying above in credit quality. jonathan: yield curve normalizing, whether it is easier now to convince people to get out of cash. when you speak to clients, what are they doing? kathy: we have been on this bandwagon for quite some time fortunately. those who have taken the leap i think are feeling pretty good about it. we are not favoring long duration at this stage of the game. missed enough of the move at the

long and to suggest that is not a great idea, unless you are in a strategy where you are spreading out maturities over time. we stopped there is money to be made in the bond market as yields come down. a lot of clients have already moved out the curve, taken that advice. jonathan: thank you. appreciate the update. going into payrolls tomorrow morning. before we talk about the jobs data, let's get an update on stories elsewhere with dani burger. dani: verizon says it will buy frontier can for $38 and $.50 per share, a 20 billion dollars deal with a 37% premium to tuesday's close. frontier bills itself as the largest pure play fiber company in the u.s.. that will help verizon offer high-speed internet more widely. demand for data usage is only expected to grow, forcing telecom providers to bulk up their offerings.

the wall street journal reported that donald trump plan to adopt elon musk's proposal for a government efficiency commission. the journal cited portions of his speech that he plans to get to the economic club of new york today. trump will reportedly outline a suite of economic proposals taking a more aggressive swipe and regulations and pledging to rescind the certain unspent funds appropriated during the biden administration. he will also double down on his embrace of crypto, removal of hurdles for new drilling, and broad tariffs. taking place today at our headquarters in new york city, bloomberg power players, where we gather leaders, athletes, and others revolutionizing the business of sports. catch names like cal ripken junior, jessica berman, steph curry. go to the bloomberg terminal or you can stream on bloomberg.com. jonathan: thanks. next on the program, setting you

up for the rest of the week, looking ahead to payrolls, earnings from broadcom.

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mark lipacis evercore isi joins us now. thank you for being with us. i want to talk about some of the pain more broadly in the chips sector over the past few weeks. what is behind that, are you willing to lean into some of it? mark: normally what happened during a semiconductor up cycle, typically every cycle over the last 15 years, you see a midcycle correction. typically happens when industry revenues hit a year-over-year peak. you continue to have revenue growth but at a decelerating rate. because semis are a momentum group, you typically see a lot of momentum investors using that you are on your peak to get out of the group. historically if you look at what happens after a midcycle correction, the group bottoms, bounces, we have volatility, which is where we are now. then the group typically

outperforms by averaged 20% over the next six months. there is still growth. we elect the group here, generally speaking want to be buying the group. lisa: what about specific players that have performed? i am thinking of nvidia at a time when many other players can play catch up. nvidia is now facing too big, monopolistic accusations, as well as a lack of proof cases in terms of how it is being used. mark: what is interesting, if you look back in time, we see computing as being the big driver of consumption of semiconductors. over the last 80 years, what you notice is there is a new computing era every 20 years. these era typically last 15, 20 years. the use cases in the beginning are often questionable, hard to

imagine, like the pc in the 1980's before word processing and spreadsheets came out. cell phones, before the iphone came out, we didn't understand that we would have youtube, waze, all of these worthwhile applications. we think it is actually normal for the industry -- initial use cases do not be as exciting. but if you look at what happened in this earnings season, some of the most important companies talking about how ai is generating a return. amazon talking about how it is saving them developer years at work. google says it has generated billions in revenue for them. walmart says it generated 850 million pieces of data for their catalog. they were able to do that with 100 times less people. we think they use cases and the return is there. it just has not come through to the consumer. if the consumer uses chatgpt, we can use that to write a poem,

but the big companies are finding a return. lisa: we are talking about this anytime a real economic uncertainty. how independent is the semiconductor cycle from the economic cycle? mark: that's a great question. the thing about the semiconductor cycle is that semis are at the beginning of the supply chain, consumers are at the end. in between our contract manufacturers, oems, distributors. when semiconductor leadtimes increase, everyone builds inventory. semi revenues go up 30%. when the leadtime shrinks, which is happening, everyone shrinks their inventory. semiconductor revenues show negative growth. we believe we are at the bottom of an inventory correction, and actually about to be in an up cycle. in more nominal economic times,

where maybe gdp is only minus one or something, you see semiconductors trumping the economic cycle. if you have a great recession, gdp is -8%, semis cannot work, but we think we are at the bottom of inventory correction, recycling will start to take over. annmarie: we are also in an election cycle. this is an industry sensitive to geopolitical concerns. dan ives says it is political when you look at the sector. who is better for the sector, trump or harris? mark: what we have observed is that the geopolitical policies seem to be quite similar between the administrations. this is one area -- when you think about the chips act, where you have bipartisan support.

we think it doesn't really matter which administration gets into office. we think there may be nuances, second or third order impacts, but by and large, the industry has with the support of both administrations. we are positive about the industry. jonathan: thank you for coming on. mark lipacis evercore isi. tomorrow will be a single issue program. priya misra of jp morgan's, michael collins. the guesses, 165k. the previous number, 114. looking for the on employment rate to drop to 4.2 from 4.3. we will see you tomorrow morning. thank you for choosing bloomberg tv. this was bloomberg surveillance. ♪

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matt: market reaction blunted after a little bit of it a disappointment on edp. katie: bloomberg open interest starts right now. ♪ sonali: investors are weighed mixed readings on the labor market ahead of tomorrow's highly anticipated jobs report. matt: and nvidia's wipeout fuels concerns the ai trade gets another test broadcom reporting after the bell. katie: from verizon's broadband push to u.s. steel trauma we have a roundup of today's deals actions. here