>> the unemployment rate moves up again and if you get a significant rise i think that will be a worrying signal. >> a decline in the unemployment rate. >> closer to 100,000 this month and we will have to reassess a view on the labor market. >> driving markets much lower. >> it really is about the direction. and we should expect to see more softening in the labor market. >> this is bloomberg surveillance with jonathan

ferro, lisa abramowicz and annmarie hordern. jonathan: let's get you to the weekend live from new york city, good morning for audience worldwide, bloomberg surveillance starts right now on a three-day slide on the s&p 500 set to become day for, equity futures negative by 0.6% on the s&p down by one full percentage point on the nasdaq 100 going into the most important jobs report since the last one and probably till the next one. the gas is a look something like this the median survey 165,000 looking for the on and plummet rate to drop to 4.2. it's not if they cut interest rates this month, it is by how much. lisa: this will be the deciding factor between 25 or 50 which is why i would argue this is a more important payrolls report than the last time. it will confirm the weakness we saw in the july jobs print or it will reject it and say it was seasonal, weather-related.

how asymmetrically our markets positioned to a downside surprise and how much can you see a balance in yields if you see an upside 200,000 response we are expecting from the likes of bank of america. jonathan: there is a strong bias to bond this -- by this bond market. we are down another three this morning on twos and tens. this from socgen, it's difficult to fade this move. bonds are more likely to overreact to economic weakness than vice versa. i think that speaks to the moment. lisa: it's the reason why the report yesterday got more potential attention if you look at the flows bank of america puts this out along with epf data. it shows in general it is bonds getting the inflows and stocks seeing some of their first outflows in the united states going back a couple of months since june. this is the bias at a time when people reassess the neutral rate somewhere below 3% for the first

time i've heard that in years. jonathan: just picking up on that fx note from bank of america, here comes 50 basis points. that's what foreign-exchange is screaming. dollar-yen down for a fourth consecutive session. four days of dollar weakness. this market, the fx market screaming here comes 50. annmarie: fx market screaming here comes 50. he started the show with the exact point. it doesn't matter what we are getting. yesterday though austan goolsbee overnight the long arc shows inflation coming down. he said it's not just about this point, potential cut, it's the path. after we get this cut what does it look like? >> the conversation with market participants about what happens and what may not happen still sounds different to what we hear from fed officials talking about the difference between 25 and 50 and even some of the most of us members of the fomc aren't talking about 50, perhaps a

string of rate reductions over the next year. >> let's be clear, even mary daly when asked specifically is a 25 or 50 said we will have to see what the data said. they want to point to the destination which raises the question of the destination no one knows anything about because we don't know what the neutral rate is. that's i thought was most interesting about austan goolsbee. the sense we have a long way to go then you hear from john paulson 2%. but nonetheless you talking but a neutral rate but no one knows anything about. maybe is this what we are seeing right now and it suddenly seen as something closer to zero as we heard from ed talking about where the destination could be. that is where we need to focus, that is where we are getting no clarity from fed officials and what they want to dress at 11:00. jonathan: the quiet period starts tomorrow. lisa mentioned the fed speakers

go through the times a: 45 eastern time. the fed president taking -- will see if anything out of that speaks to jobs number we had and lisa mentioned the governor at 11:00 a.m. eastern time. the last big fed governor set to speak before the quiet period kicks in. let's have a set up for the day ahead. this is the price action if you're joining us. equity futures pulling back weaker on the s&p 500 stocks are lower, bonds are being bought. we see that all week, yields are lower by three basis points. in foreign-exchange, another day of strength for the euro least calm her. come up we check in with stocks falling ahead of the payrolls report grade till the markets of all free search of the plan to cut the corporate tax rate and sarah of wells fargo on what it would take for the fed to go 50 at the upcoming meeting. let's begin with our top story

preyed stocks falling ahead of the august payrolls report at 8:30 eastern time. looking for evidence the fed has stuck the soft landing. taking an optimistic view on the economy writing this jobs market is solid for the consumer is healthy and credit markets are open and robust. good morning to you sir. what are you looking for eddie: 30. >> everyone wants to zoom in, we want to do the opposite. we want to zoom out. because it's a number and we will deal with it and it's going to be what it is. more importantly we want to think about the bigger picture. the bigger picture is the global economy is fine, the u.s. economy is fine, credit markets are wide open. real incomes are growing not just in the u.s. but in europe and in asia as well. you of global liquidity on a very nice uptrend. the fed will reinforce that weather 25 or 50 it's less

important than we are in a global rate cutting cycle that's probably good to be the most synchronized in the last 40 years. the public-private partnership investment spending for ai, for climate and for conflict is robust open and supporting the global economy for the next couple of years and i think we are going to have political continuity in the united states, i think vice president harris is going to win in a landslide. i think the opportunity for a democratic sweep is growing and that supports. that's fine. jonathan: didn't happen if it's not. that's fine. it ensures policy content in the u.s. which is led the u.s. to be by far the best performing developed economy in the world since the pre-covid period. all this sums up to be supportive for earnings. earnings of the linchpin for stocks.

not just q2 better than expected but the 12 month forward earnings outlook continues to rise and rises in the u.s. and in europe and in the asia-pacific. and when you have that situation you want to be supportive, you want to be focused on the opportunity set not looking for a big drop, they're knocking to drop at a big way when earnings or petitions are going up. so we want to stick to the process and we want to focus on rotation not recession. jonathan: i started smiling on the eighth reason to be bullish. jay: i guess i give it very convincingly. jonathan: on allocation a little bit longer what you set rotation. the rest of the world, small caps. jay: august was the fourth month in a row when the s&p went out and all-time monthly high. the fourth month in a row. august was also when 47% of markets, global equities hit a

new 52 week highs. the best number in over three years. so yes you had the equal strength s&p etf hitting a new all-time high. soviet cyclicals breaking up so i think the opportunity set continues to be robust. the fact were able to be where we are in the equity market with tech taking a pretty big header we are effectively passing off leadership from tech to the cyclical space from large-cap to small-cap and with the dollar you pointed out is a very important point we've been focused on this for a while. it's been a long time coming. we think it's rolling over and that will support non-us equity outperformance. lisa: the market disagrees with you on several different points. there's a concern about weakness if you look particularly at the commodity markets you see oil prices at the lowest level in more than a year and you have the opec-plus countries really responding to this. how do you understand where you

differ from the market and where the market could have their hands around something that you want to pay attention to. jay: i've been around long enough to know when the markets disagree with me. if you can stick with the process and zoom out rather than zoom in, that's where you want to be. and the point on commodities is right. that's the kind of thing that's not quite working out for my view. we are long commodities, we are overweight commodities and underweight bonds. and for the last month or two that's been a great place to be because bonds have had a rally and commodities have done very well. when we go back to the zoom out, to the global economy which we think looks robust, we think we are early cycle non-weight. we think inflation is behaving better than expected. the rate cut cycle will be supportive for the economies that commodities probably don't have a lot of downside here and

the upside we think is relatively significant. so we are long copper, we are long a couple of other things as well. uranium minors, right now we are all sitting on pretty powerful support lines and they've come in a lot. copper is down 20%, uranium is down more than that. oil is down significantly as you said. it is -- that is where and the picture is never perfect, the picture is never perfect. so you always have a fly in the ointment and right now the fly in the ointment is commodities and we are watching it carefully. lisa: we get what some people expect to be another fly in the ointment, a payrolls report that could confirm the weakness in the july payrolls report. what would we have to get for you to reassess the bigger picture view and wonder whether maybe some things were framed a

bit more around the edges. jay: as i said we want to zoom out, not in. we try not pay too much attention to anyone numbers. you have one little tie over here. it's not perfectly set. when we look at the jobs market. the percentage of job openings to people looking for work is roughly one to one. people talk about being the lowest it's been in years. the other side of that coin is it's better than it was for the entire periods from 2020 to 20 the job market is simply normalizing. it's not falling off a cliff and when companies can issue bonds as they have this week, this week has been a monster week for investment-grade investments. when rates are coming down and credit is becoming more available, not less. we are not really concerned the economy is all of a sudden going to fall off a cliff and people

will have to lay off tons of workers. we don't see an environment where the economy will fall off a cliff. people talk about consumer. disposable income to interest obligations it's at the best in 40 years, there's no real pressure on the consumer. the consumer is fine, people talk about like it's a problem. it's not a problem. companies are fine. the government who's holding the bag these days in terms of fiscal expansion. they are issuing plenty and everyone's happy to take it. annmarie: we are clearly looking -- you have such conviction about the election even though it is if you look at all the polls it is a knife's edge and pennsylvania right now is what josh shapiro told me a statistical tie. but given that said, if it is

not a landslide how do you see that what you call private public partnership, how does that change in the trump administration. >> it's we have goldman-s tax, the view of moody's, it's the view of basically anyone with the policy mixes. jonathan: i thought you wanted to go against the establishment. a lot of establishment organizations. >> we go back with the big picture. but look. >> goldman sachs agrees with me. >>, morgan stanley guy. in this case since i'm under it from all sides. pulling out every stop. the u.s. has been by far the best performing economy coming out of covid, best growth, best inflation. that's the biden harris policy. the sustainability of that i

think is critical to being positive about the u.s. over the next four years print we've had a view, a global macro outlook 22 any three to 2027, that's our focus. policy continuity. the trump agenda is an agenda where you deport millions of people, that destroys the job market, you're going to extend tax cuts and blow up the deficit. that's really great for the dollar. you'll institute massive tariffs on pretty much everything. what's that can it do? spike inflation bring as i look at it you're talking about the job market, spiking inflation, a blowout deficit and tanking the dollar. to me i am a dollar bear so i kind of like the trump policy because it is anti-dollar for sure, but on the other hand we will trade off the dollar smash

for policy continuity because the dollar rolling over anyway as the interest rate differential shrinks. jonathan: good to see you. thank you so -- thank you sir looking ad to payrolls with some news spread and your bloomberg brief years dani burger. >> informing that the canadian companies buyout offers insufficient. the japanese operator 7-eleven stores revealed for the first time the offer price, $14.86 a share. it is a 21 percent premium to when the proposal was first disclosed but it is below february's one-year peak in share prices. p wc has resigned as auditor for country garden, the defaulted chinese developer says pwc is unable to fulfill the timetable requirements the promises over the financial statements for 2023.

filing shows it will be replaced and a source told bloomberg last month pwc was facing a six-month ban. for its role in auditing another failed developer china evergrande. broadcom shares are lower in the premarket trade 8.7%. it disappointed on the sales forecast highlighting non-ai operations that are going more slowly than anticipated. company is a wide variety of offerings including mainframe products, security and data center software and among the main for apple and other big tech and that's your brief. jonathan: up next on the program , completing policies. >> further support the revival of american manufacturing my plan calls for reduction in the corporate tax rate from 21% to 15% solely for companies that make their product in america. jonathan: how workable that plan is on this payrolls front this

morning. good morning. ♪

jonathan: it is jobs day and equity market is sliding down by 0.6% on the s&p 500 a little but soft during the session, under surveillance this morning

competing policies. >> to further support the revival of american manufacturing our plan calls for expanded r&d tax credits. 100% bonus depreciation, expensing for new manufacturing investments and a reduction in the corporate tax rate from 21% to 15% solely for companies that make their product in america. >> here's the latest, donald trump planning to smash the corporate tax rate in an effort to fuel the u.s. economy's plans contradicting the proposal for president advice president harris that would raise rates to 28%. tobin markets of will tobin markets of wolf research saying only in the event of a democratic trifecta do we expect market wide earnings headwinds from corporate rate hikes along with modest new tax benefits for families and housing. i want to park the compare and contrast, focus on that conditional corporate tax cut

from donald trump, how workable might that be? tobin: i think there are questions about how to draw those lines. it's deeply unclear from the way he characterized yesterday how it will work but i think tech experts around dcr a little bit unclear on exactly what's meant by this and frankly all this stuff of course gets fed into the congressional meatgrinder, then there will be a process of trying to flesh this out and it's not totally obvious how much support there will be or how much implementation possibility there is or around conditioning that cut off for u.s. manufacturing. annmarie: i hear a lot of this is the opening salvo before negotiations break is this your asportation is coming in low and it will level out in the 20% range. >> i think both candidates are

proposing more than their going to on taxes. your colleagues are bloomberg tallying up everything trump and vance have talked about and gotten a number north of $10 trillion gets fairly clear we will not get to a $10 trillion tax cut package through congress even if there a republican trifecta. there's good to be a need for prioritization and frankly they're setting for trillion dollars in the hole they still need to extend the expiring portions of trumps 20 tax package at the end of the last year. the cost of getting that done will be pretty serious at a time when the overall fiscal situation forces in outlook, the deficit outlook looks quite grim to the horizon. i think there's a lot of these proposals out there whether it's cutting the corporate rate to 15 or no tax on tips or this social security tax carveout not all of this is going to end up leading to this. annmarie: on both sides when it

comes to these. and to your point really depends on congress but you also write in your note that for harris it's really about personnel changes, significant personnel turnover and potentially she will be more pragmatic. who exactly do you think will put in positions that move more to the center. tobin: i think it's too early to speculate who is going to get what job but certainly the indications we got from the way she's been running her campaign and the way this was pitched, reports from people around here is we are probably going to get fairly salvageable figures metal the campaign looks like. she think -- i think is notably not under a lot of pressure from the left compared whereby was in 2020. he had done these unity commissions to try and heal the wounds coming out of that fairly out of the primary. so the biden administration in many ways has been a power-sharing arrangement with progressives.

and harris is not in that position. change after the election i certainly don't think the left wing of the democratic party is going to remain quiet indefinitely. certainly they will go at it and want their seat at the table. heading into the selection having made promises about how much power they get. i think you will have -- they will have the latitude and i think generally that's going to be people who she is putting in there to make the decisions to trade-off cost of benefits rather than some ideological commitments. lisa: we heard a number of banks talk about donald trump's plans leading to a steeper deficit of the next decade. do we know enough information given all of the holes to say who's in create a bigger deficit. tobin: i think there are questions about it. looking at the plan and what it means with deficit i think is somewhat missing the point

because some of what being is being proposed -- what is being proposed. the risks of a high death -- deficit under trump, there's more freedom of movement in a trump wins a scenario because he so much more likely to be in control of congress. but the bipartisan scenario under harris where she probably is facing a republican senate could be a high deficit scenario. she's proposed to extending most of the expiring tax cuts as biden did and if that happens i think it probably won't be paid for in substantial part because it will be challenging to get bipartisan agreement on $3 trillion worth of offsets to cover the cost of that. in a harris scenario me -- we may see a large deficit exemption even if you don't get a lot of proactive new policymaking deal stuff. jonathan: got to leave it there, appreciate the update. ♪ and intel. clearing the way, [rumble] [whoosh]

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jonathan: three day slide on the s&p 500 through yesterday into this morning. we are negative by 0.6% on the s&p 500 on the nasdaq 100 down by 1%. we talk about the drag from broadcom in just a moment. the small caps and russell negative by .45. the two-year, 10 year, 30 year a focus on twos and tens. we had a move this week at 20 basis points on both the two-year and the 10-year. the two-year down to 371 on the

tenure down to 369. a little bit early this morning talking to lisa about it a few times. this is the survey they are doing pre-nfp. in that survey the said investors are anticipating lower yields and there is a bias towards buying any post payroll down trade 47% of respondents participate in the next 15 basis points and 10 year yields will be lower. lisa: saying right now their clients are buying bonds with no questions asked what they're looking at the data segment. the question is how asymmetric is this sort of balance of risks if you get some sort of downside surprise by bonds and get a massive upside surprise may be cell around the margins but then buyers will swoop in because there is this belief this economy is solid. jonathan: it feels like the trend and will take more than one jobs report to convince people otherwise. dollar-yen at 14290.

negative by 0.4% more yen strength. the fx markets screaming the fed is going 50. lisa: it's also this idea of the japanese authorities expected to hike yet again later this year. at this point a lot of people saying because of the noise elsewhere the biggest litmus test for what the currency read through and the nonfarm payrolls will be the yen, that's what people are looking at, saying it's a must the highest conviction trade at this point because both sides of the trade the other side get a little bit fuzzy in terms of the direction of travel for central banks. jonathan:jonathan: under surveillance some top stories for you. broadcom delivering a disappointing sales forecast, expecting sales to come in at $14 billion in the fiscal fourth-quarter suggesting its non-ai operations are growing more slowly than anticipated. the name is down by a must 9%.

lisa: was it really that bad? that's what i'm wondering. it wasn't terrible but it wasn't terrible but suggested non-ai types of applications saw a little bit of a decline. i'm interested in what the readthrough is to apple which is their north american customer they referred to obliquely on one of their calls. does this indicate more weakness with the smartphone development? that might be the more interesting angle. annmarie: they beat expectations and the market is moving that's not really attached to ai. morgan stanley saying ai growth is not linear but remain strong. if everyone in this bonanza about ai and that's part of the business that's growing it does feel like what you say it wasn't that bad. lisa: apple with a big unveil on monday. we will have some guest for you and that kicks off next week. i was at what the fed speak briefly. mary daly telling the wall street journal any further slowing in the labor market

would be welcomed. austan goolsbee also speaking telling marketwatch he seen mounting warning signs from the labor market and expects multiple rate cuts over the next year. jonathan: this is not just about ash lisa: -- lisa: this to me is an interesting quote i want to read verbatim. inflation coming down significantly and the unemployment rate is rising faster than fed officials had expected in june. there's a feeling things are moving more quickly and maybe even though everyone says again and again fed officials do not see anything we don't see. maybe they are seeing some thing we do not see and you can feel that in the tenor of the beige book and the motley picture behind some of these data points as well as from the chicago region that austan goolsbee overseas. >> look out later following that jobs report. let's talk about the latest in the steel industry. the cleveland cliff ceo saying he would bid on u.s. steel's

assets if the $14 billion takeover bid fell through. he's working with jp morgan and wells fargo on the plan coming a day after president biden was said to be preparing to block the deal. amh the saga continues. annmarie: the ceo has been one of the individuals of the table trying to bid for this saying i will not belie the details but we are good to go. what is the money? they came in under their bid and if this was to go through, where is the ftc when it comes to the steel industry in the united states because this would be a massive and really the only big player. >> there are questions around. the idea of questions about how this is for the unions, the fact that they came out and said they have not been informed biden was planning to block it. the idea you have cleveland cliff saying here we are we are

still available for you. you don't get a sense of some controlled process and how much was in ago she did tactic and how much is real. jonathan: it is something that will continue to be on the campaign trail. mac mccormick looking abroad to see how the u.s. stacks up to the rest of the world writing non-us growth is indeed slowing by an ongoing china slump. loeb manufacturing pmi's slide. on the rise again and breeds tons of risk. higher volatility and slack us returns per mark, welcome back to the program. i think this quote is really important. we talked about normalizing interest rates here stateside. haven't talked enough about rebounding growth differentials. how difficult would that be given the struggles we see in europe, the struggles in china. >> i think that's where the asymmetry lies because what markets have been doing is looking only at the u.s., u.s.

data and surprises, growth revisions and the fed and there sing the u.s. is slowing, inflation is moving in the right direction. we don't really care about inflation. and what they're kind of missing is china, all the indicators are to lower level than the u.s.. the rate of change and where those indicators are are moving further and faster in the wrong direction relative to the u.s.. when you stack it up. a big pcf to think about is a relative market but it's only focused on one absolute theme which is the u.s.. i think we will broaden the understanding out. we know the fed is going to cut whether it's 25 or 50. i don't know if it will have a tremendous impact in the months ahead but what matters is what's happening outside the u.s. particularly as you get through the election and what those consequences are for these other countries. jonathan: there's a limit to the downturn in the u.s. dollar or are you saying this could flip in the other direction. >> we are long the dollar.

we like euro lower, we also like dollar lower. those are three ways of thinking through it. as you mentioned we talk about the asymmetries. one we are well above consensus. td is at 205 today. i think the asymmetries are what we tend to do you look at the factors driving the fx market, this is all about diversion print there's really no macro story. it's as if they're not really driving performance in the way we think they are based on narratives and positioned short-term valuations that are really dominating fx performance this year. what we've finally seen is those indicators in favor of the dollar. once you start seeing the market positioning and biases leading one way. if you get surprised then you see the market moving the other way very quickly so i think that's the pain trade here is the dollar could rally quite aggressively on a number of review -- we are looking for

verses say if data comes in weaker than expected i don't how much more downside there is. i don't think there's a lot of follow-through. lisa: let's look at assumptions underpinning the market position you're talking about. we were talking what how much the fed could cut rates, the fx market is pricing in a 50 basis point rate cut this month. there is this belief the federal reserve is likely to cut more aggressively than the ecb. this as we saw wage inflation coming in lower than expected today in the euro region. growth dominated in the latest reading. at what point do you think that is poised to flip with people looking for the same number of rate cuts and the ecb if not more? mark: it is an important point. markets are trying to figure out what the neutral rate is in the u.s.. there's a short-term rate, longer-term rate and if you look at market pricing on the fed essentially neutral rate has gone very low. think of the assumptions right how do you get a 3% terminal

rate. 2% inflation, and .5% growth, those are basic assumptions even if you have 2.5% and 1.5% growth in terms of inflation and growth your somewhere at three to 4% in terms of a neutral rate so market taking fed pricing in the low 3% is indicating there is a recession and it's not the same read your getting from the equity markets so i do think there's a massive disconnect that if u.s. data which is turning to stabilize and move in a better direction and we are starting to see these indicators move in a worse direction in the euro zone i think the line of direction here was that if things get worse in the u.s. they are likely to get worse in europe. i think if things are going get worse in europe the thing that's connected is china. china and european data are linked at the hip. china is a leading indicator it's telling you things are not to get better. and if you think about what we

have to see from france as they will deliver budget we've seen the german elections i think there's also a feedback loop for the politics reinforcing waning confidence in the european growth story. to me we are probably at peak divergence between the ecb and the fed and then again the asymmetry is basically seen in the rate referential move in favor, relative equity story, i don't think it looks attractive relative on that. lisa: i get very passionate about the neutral rate. i feel this is the key question as we figure out with a neutral rate is. you think about that between the ecb in the united states, do you think we are seeing peak divergence right now between the federal reserve and the bank of japan at a time when this is the consensus trade increasingly the bank of japan will hike rates again and that could continue giving that strength we receive -- we were seeing in the yen. mark: it's amazing how quickly

consensus can flip because the consensus was the boj wouldn't be able to do anything this year. we've been on the side they have to move. we are looking for july hike. i think again a big piece of this is theirs japan, the government, the pension funds and boj are all working to strengthen the yen, reduce the under valuations and trying to find a way to bring some of that money back home. the expectations of people who cover this and where the money is going and on the equity and fixed income side bring more money home. so they raise rates which gives them an incentive to repatriate foreign invested bonds back home so that is further addition to strengthening yen so i think the key themes is we are going to get more macro volatility underlying the carry trade. the yen should continue to outperform and if we get more

volatility, i think the markets completely ignored what is a tossup at this point if you think about trumps platform of deregulation, tariffs and tax cuts that's good for u.s. equities and bad for the rest of the world, more defensive positioning. for us it's higher of all, reduce carry, but defensive market versus the dollar. annmarie: why hasn't the market priced election risk? mark: there's a lot of fatigue abound how to trade it. it's a lot of interest in what should we do, how do we hedge. cmh should be higher. i think we have so much uncertainty and it does not stick as a trading theme. people were able to sink their teeth into the u.s. story, the fed story as we talked about we use the term cereal monogamous for the vfx market. the only focus on one thing at a

time. and then when it gets distracted finds a new theme and sticks without until it does not work. the u.s. election has not had the sticking power because there's no conviction. even when it was clear trump new he was going to beat biden based on the polling data we started to see the emergence of trades that would resemble a trump victory. u.s. msci outperforming, some strengthen the dollar. that all went away and we are headed back to having to focus on this. we have the debate next week and i think when we roll in september and october we can no longer avoid the statement. we will be passed the fed, we will have potentially cut in september and we can focus on a new thing which is probably the french budget, the u.s. elections and some of the laboring geopolitical risks. one of the things that's important is our geopolitical risks is now a much higher level than what we see on our macro volatility events which suggests the markets have some discontinuity there.

>> if you were just joining us welcome to the program, payrolls out later this morning. the estimate in our survey 165,000. looking for that to drop from 4.3 to 4.2. let's take the opportunity to get you up to speed with some stories elsewhere with your bloomberg brief. dani: president biden's son hunter is avoiding another trial. he pled guilty to federal tax charges after his gun case conviction months ago. but tax charges carry up to 17 years behind bars federal sentencing guidelines should mean muscle -- much less time. he will be sentenced in december. apple has approved an update for the we chat just in time for the iphone 16 release. the latest version adds new features including the instagram we chat moments and livestreaming. there have been speculation in china that a dispute between apple and tencent over app store fees was snowballing into something larger but this helps

put an end to that speculation. super typhoon came ashore in southern china. destructive winds and torrential rain, of the joint typhoon warning center said it had maximum sustained winds of 160 miles per hour per it moved to a category four hurricane which is considered a major storm. the typhoon is set to cross the west coast today. that's your bloomberg brief. jonathan: we will touch base in 30 minutes. up next, a catalyst for a cut. >> i don't necessarily think we need a payroll report that is strong potentially is 100 k to have 50 basis points. i think the 50 basis point rate cut is in on an environment that is much weaker than what were now. >> 100 k still strong. the conversation up next. ♪

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jonathan: three day slide could become day for on the s&p 500, yields lower by another three basis points on the 10 year. under surveillance this morning, a catalyst for a cut. >> i don't necessarily think we have to have a payroll report that is as strong potentially is 100 k to have 50 basis points i think the 50 basis point rate cut is in an environment that's much weaker than were seeing right now. the fed does not want to be appearing as recalibrating monetary policy rapidly in an environment where the economy is strong. jonathan: we are less than two hours away from creek jobs data, of the bloomberg survey expect in 165,000 jobs added for august

marking a stabilization in the labor market. sarah saying the employment situation for august would be imperative in determining if the rapid deterioration of employment conditions indicated by last month's report was making noise or a signal the jobs market is struggling to maintain traction. welcome back. let's go there, the distinction between the two. where are you looking this morning that confirms it is one but not the other. sarah: it's a matter of momentum, so to what extent do we get perhaps a bounce back in hiring which we expect, to what extent do we get a possible dip back in unemployment rate versus do you actually see the momentum worsening. seen yen plummet rate increase and up their downshift in hiring numbers. jonathan: looking at some of the gases today at the upper end double-clicking into the research, i get the expectation, it is a buzz on wall street,

it's payback. i keep seeing this word and then see payback. what was it that might've been impacted and how much payback do you expect to see in this report. >> i think there are some expectations that given you had hurricane beryl hit during the survey week that was depressing payrolls but maybe you saw some misclassification workers not there due to weather misclassified as temporary layoffs which is why you saw that increase in the unemployment rate. i'm not buying the weather story so much when you look at the industries that would stand to be most impacted by that landfall of the hurricane like construction and manufacturing. so those with weekly pay periods those improved over the month, we did not see a big impact in terms of the response rate and when you look at some of the state you saw some of -- 22 other states seen payrolls declined. it looks more widespread and that's over not expecting much

payback. some of the pickup has to do with the volatility that is apparent in the payroll survey. lisa: let's say you are correct and it's 145,000 we get, how much are we looking at something more like 85,000 when you downgrade it for the revisions we could expect in say six months time. sarah: that is the tough part. there are some big benchmark revision since the last jobs report that suggests those initial prints have been overstated so we think that has a lot to do with the model so the fact we are still seeing more jobs added because of business formation which we have seen in the more recent data has gone back to its pre-covid trend. so while we did not learn anything explicitly about how the extent to which they might be overstated since last march, i think there are still -- there

is still some skepticism whether it's monthly revisions or benchmark revisions but the underlying trend in hiring isn't so strong as we first thought which i think would make the unemployment rate more important than it usually is as there has been skepticism over the veracity of the payroll numbers. >> there is a belief that there something going on more pernicious. that it never looks like a serious downturn until it is too obvious and too late to get in the way. where are those signs this time around because we talked to different retail executives, analysts who say things are softening but they look more like they are normalizing. can you point to anything that contradicts that and edifies with the market is expecting? sarah: it's more going back to this momentum story. we look at the level of various labor market indicators. they are not bad in and of themselves but it's that shift in direction that is where concern creeps in for me.

if i want to look at some of the more worrying signs i look at the hiring rates. we saw that here in the july numbers with still some of the lowest level since 2014 which means if we do get any pickup in layoffs you will see a sharp slowdown in the hiring so the layoff numbers are one of the brightest spots in the jobs market but that lower hiring rate, the fact that you see the trend lower in terms of business hiring plans whether it's job openings were small business numbers you have the pmi, the ism with the regional surveys are some of the weakest we've seen since coming out of the recession. i think all of those are still telling us we are in a delegate position with the jobs market where that normalization could turn into outright deterioration. annmarie: the jobless rate barely rounded up last month. it was 4.253%. how important to you are those three decimals?

sarah: we've seen it the past couple months that it's very rounded up. we've been expecting some feedback in the unemployment rate in previous reports and get it keeps creeping higher. i think we have to be careful in terms of even looking at it altitude decimals and going back to the trend so even if we get back in here in august you're still can see the unemployment rate up half a percentage point from where it was a year ago so that would signal maybe momentum isn't weakening quite as much as the july report signal. this is a jobs market that is still softening. we are back to what is a more idealized state but if we see further weakening it gets uncomfortable and i think potentially sets off that negative feedback loop where you get the pole back in income and spending and therefore hiring. jonathan: got to leave it there. you can really sense the anxiety from a lot of people looking at

this market? we've heard it all week around the job story how finely balanced things are. a string of 50 sprayed we said this yesterday getting a strong print unwinding some of the moves we've seen. lisa: there's a feeling you can see a real dramatic deterioration or a forming up and then a recovery from some of the slowdown we've seen and it seems like the fed is going to make the difference even though we don't understand the transmission function they have you here this in everyone's forecast we are simply throwing darts and that's what it feels like. >> i see little daylight between what were talking about on the program and fed officials. still a lot of daylight. we will see what we get from governor waller. equity futures on the s&p 500 pulling back once again near session lows. the jobs report is just around the corner. michael of morgan stanley, josh wingrove we catch up with aditya

of bank of america. this is bloomberg. ♪ ♪♪

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>> any chance we are below 120 or 100 that's where we see material volatility. >> if we get a week print at 125 or less the fed will likely cut by 50 basis points. >> i don't necessarily think we have to have a payroll report that is as strong potentially as 100 k to have 50 basis points.

>> we continue expanse is probably still the base case. >> we get that solid increase. changing the result of a soft landing. >> this is bloomberg surveillance with jonathan ferro, >> lisa abramowicz and annmarie hordern. >>kicking off september selling stocks and buying bonds and that trend continues. the second hour of bloomberg surveillance starts right now. your equity market on a three-day slide. we are down by 0.6% on the s&p 500 on the nasdaq down by one full percentage point. switch on the boarding getting to the bond market yield scores, the two and tenure sliding for four consecutive sessions this week alone down 20 basis points the front and long end of the curve. the 10 year, let's call it 370. the gases look like this for a: 30 eastern time 165,000 for

payrolls the median estimate in our survey. that's the headline, looking for that to drop from 4.3 to 4.2 and immediately after you see some revisions to some notes about whether we go 25 or 50 this month. lisa: the time has come, that set off the trajectory in the bond market. following the back-to-school trend. what were seeing as the market pricing and rate cuts and the question is to where given the fact the fed has said the time has come. that's where the estimate start to make a difference if they cut by 50 basis points, it doesn't just mean a one time cut it raises the point maybe they will be cutting much more aggressively to appoint it's lower than what a lot of people thought. annmarie: that's what austan goolsbee's comments were interesting. saying he thinks it's pretty interesting that right after we get those numbers, ubs, a well-run central bank this

statistic would not change policy. under powell, data dependency the tone of this report, that's why it's good to be so important to hear from fed officials after the data. >> this conversation sounds very data point dependent. >> part of that's the question of how much it -- doesn't talk about pay back which you mentioned earlier this idea it's better than expected because it's taking into account the weather reported disruptions or is this going to confirm some downward trend. that's the reason why. it's 50 basis points and what does that signal about where the fed is headed. >> if you're tuning and welcome to the program. equities down. stocks lower by 0.6 on the s&p. yields down on the 10 year. and the euro just about unchanged against the dollar.

coming up this hour we catch up on a breakeven payrolls print. michael of morgan stanley is donald trump doubles down on tariffs and aditya of bank of america expecting an upside surprise. counting you down to u.s. payrolls. bloomberg survey in 165,000 jobs for august. jp morgan drawing a line saying if we get 150 the market can disregard the week july report as a one-off. but another week print would suggest the lawn -- nonlinear weakening is upon us. good morning. good to see you. the question for the best part of a month, we've had some people on the program say the market is pricing and things to aggressively the federal reserve. walk us through why. >> if i look at the total amount of rate cuts that are priced in we are essentially, all we've done is taken that endpoint from the end of 26 and moved to 25

which is a risk management approach. i don't think the totality of rate cuts we are pricing in those rate cuts a 2.9%. where's neutral rate? somewhere between 2.5 and three. we are pricing in a soft landing. i think the market side is the economy is going faster than it was six months ago so the fed and we heard from chair powell there was a shift in the reaction function they don't want any more pooling in the labor market so that's the argument, quickly get us to neutral. if the economy stays in a soft landing that's essentially that 3% close to that level. i think the question is is the economy still ok. that's when nervous about today. another week print trying not to be too stressed out before it but i think then we have to worry that this is what we saw in beige book and elsewhere, they can cut 50. what will that do?

they should be cutting a series of 50's getting to a term that are not priced for. >> what i hear from you is we don't need a recession or even much of a downturn to get to 150 basis points. the thinker could be more downside to yields from here than many people suppose. priya: if the economy is slowing down faster and i'm not saying recession, i'm seeing zero to 100,000 payroll spread that slowing enough that the fed is cutting. so the lags when you incorporate lags, transmission i think it would take them a year or at least six months to get to accommodative territory and than the weakening continues because of the lag effects. where is this in a slowdown, a 2%. where's the fed cutting two. we are so stressed out about 25, 50. and, of the total amount of cuts.

250 is consistent with soft landing. i don't know about 500, i think that needs a financial crisis so i don't want to get people's hopes up in terms of total. lisa: let's build on that. you are speaking to a sentiment we are seeing in citigroup as well paid the global head of strategy said the fed does not take baby steps. showed no hesitation on the way up in 2022 and they won't show any on the way down either. if the jobs numbers disappoint expect a series of 50 basis points not only in september but also for november and december. our do you agree with that? one hundred 50,000 is a line in the sand? priya: initially i would completely agree. remember chair powell would say policy is in a good place. we are very restrictive now. so if they cut a couple of 50's as they're getting to neutral,

absolutely. do they continue? then we have to look at the economy. the economy seems to be in a soft landing and the totality of data with the floor trade it's not really suggesting we are at the brink of a recession. we could get there. this second -- recession is always nonlinear. tapping once in 95. the market does not know what was a soft landing. in my view a few 50's but if they cut a few 50's to get us to neutral 50 i don't know if they get there. they are suggesting they have the luxury of time. things are slowing, they have to be fast. lisa: you said you don't want to get markets hopes up that they will cut 500 basis points or whatever they will cut to zero again and it raises the question of what the response would be to a series of 50 basis point cuts

in risk assets at a time when at one point you've got lower rates meaning a good thing for risk assets and the other it speaks to something that's a bit more protracted in terms of weakness in the market. priya: i think the fed would spend the first couple of 50's is normalization. that's ok from a messaging standpoint. why are they cutting 50, but this is where the data is. in terms of are we at the brink of the labor market sharply and if that continues, if the economy continues to slow down, it's less about the 50 and more about the economy. risk assets up, you increase the probability from recession from 10% today to 25, 30%. that has to result in a repricing of risk assets. i don't know if 50 will do it but if the data is weaker i

don't buy the argument the fed will cut risk assets. even a couple of 50's, that's priced in. we have to get the economy stabilizing, for some maybe it's the election or some other global growth which i'm not seeing signs of. we have to stay at this level to take the 50 and say that's great news because were normalizing faster away from the shift. annmarie: how do you position in this world of nervousness you have? priya: you are locking in yields of 5.5, 6%. i think that's what explains why we see flows into one funds paid as an aggregate bond funds. you look at corporate fundamentals are strong. we are positioning more away from some of the areas where we feel we are getting data enough to get take that risk. we may not be getting above 4%.

any rising rates as a buying opportunity. we haven't had any yield in fixed income or property for the last 20 years, it's there you are that heat and diversification. lisa: it would say take the big picture, zoom out, u.s. exceptionalism. i don't understand why one data point will tip the scales in terms of where they're the economy is falling off a cliff or not. why do you think this actually is the moment of truth or you will see the direction of travel? priya: i think the speed of deterioration has increased. the economy's been slowing for the last year. in the last few months you saw the beige book, the last payroll report and you get one more like that, it comes down to valuations. we should be pricing in a 30% chance. i'm not saying 50 or above 50. given the totality of data the

should be a probability, it's that going up, a valuations change and then you can take a step back and say fundamentals are strong, of the fed has quickly normalized. they knew they might be able to take a step back and say valuations are pricing and enough of a chance of a recession. i don't think risk assets are there right now in terms of pricing in, things may be nonlinear knee. -- nonlinearly. every recession is nonlinear. it gives us more of a sense. jonathan: good to see you, thank you for explaining your views. the last time we to jobs report that week, trading in the four 40's. we are down to the three 70's on a two year yield. updated stories elsewhere with the bloomberg brief. dani: the head of global affairs for x is leaving the company

formerly known as twitter. one of the few senior execs who made the transition after mosques take over. he said he made the decision to leave -- after elon musk's takeover. he made the decision to leave a while ago. the scrutiny around the world as well as the brazilian band of x. kamala harris raised 306 to $1 million in august, almost three times more than trump. she 36 under $15 million since president biden announced he would step aside on july 21. the campaign said more than 60% of donors in august were women. 1/5 were registered republicans or independents paid nearly 3 million people donated including 1.3 making the first donation in the election cycle. in the u.s. open american jessica shook off a rough set to storm back and take the match against her opponent in the semifinals. she moves onto to a first-ever

major final which faces off on saturday for a chance of the trophy. in the men's tournament, a two matches are ahead today, and this evening the all-american semifinal taylor fritz takes on francis t ortho. that's your brief. jonathan: doubling down on tariffs. >> the key to this effort will be an american trade policy that uses tariffs to encourage production here and bring trillions and trillions of dollars back home. we deserve it. >> live from new york this morning, good morning. ♪

jonathan: equity softer down

negative by 0.6%, the rally in the bond market continues in the three 60's on the 10-year. under surveillance this morning, doubling down on tariffs. >> i intend to reverse this model and once again turn america into the manufacturing superpower of the world. we can do that with being intelligent. the key to this effort will be a pro american trade policy that uses tariffs to encourage production here and bring trillions and trillions of dollars back home. and we reserve it. >> donald trump promising to use tariffs as an economic weapon in a potential second term. is her marks out of tuesday's debate with vice president harris bread michael of morgan stanley with the following. terrace could pressure economic growth but possibly more so outside the u.s. potentially driving were dovish central-bank policies overseas and at the federal reserve. michael good morning.

that's a thoughtful take on the situation comedy think some of those policies could be more damaging to countries been domestically. >> thinking of at the u.s. posture in terms of trade relations with the rest of the world with imports one pressure will be overseas. so this comes up in the context of the dollar. and the trump campaign about a weaker dollar but some of these with initially would manifest in the stronger dollar because it's putting pressure on the rest of the world than the central-bank dovishness outweighing what it would do. >> most people talk about what he means for u.s. consumers. who would win in that scenario? >> i think it is complicated to say that there are specific winners and losers. over the long term if the u.s. is pursuing more protectionist policies which it probably is regardless of who is president.

it's a tactic republic and swaddling on tariffs. crating those long-term incentives. in the places that are best set up for that are the ones we know for the most part mexico, if you go into asia talking about vietnam and turkey, because these are areas we have to re-create the label -- labor supply and cost elements in china but you don't have that in the aggregate or multiple different places. lisa: especially the time where it's basically a tossup and no one really knows what can happen and you say i have no clue. but i am curious about whether it's getting easier in one sense. the two parties are coming to the same place. increasingly looks at the policies are similar to one another. you talked about protectionist policies. is there a baseline? mike: talking about trade

thrilled differences in the short-term weather using tariffs. if that's true the real difference in 2025 is pursuing trade protection policies or don't. the end state might be the same but in the short-term the tactic of using tariffs crates more volatility and uncertainty. and to the extent you've got a republican pursuing those policies may be something on the back end in 2026 it's helpful to the economy in terms of greater fiscal expansion. the sequencing here is important because you might very well go through the tougher stuff. jonathan: we can have the tariff conversation it's easier because we don't have the talk of the makeup of congress when it comes to tactics. harris is saying take things from 21 to 28. trump is saying take things a 21 down to 15. imagine you feel that a lot of calls yesterday from clients. what did you tell them about how workable the trump plan was for tax cuts.

mike: the workability is a function of politics. at the end of the day all these tax plans have to pass through budget reconciliation process that in some ways starts with party leadership citing what number on the deficit expansion of the comfortable with. everything fits inside of that. that's effectively what happened with the tax cuts and jobs act. were senator corker said we could do $1.5 trillion on the deficit and everything fit in from there. the proposals we have to pencil in assumptions how workable is 28% of cap gains is supposed something higher. that's a function of what they deciding to will -- willing to do and when does dave feel like they need to pay for the leverage. annmarie: it's ton of proposals coming on both sides, expanding child tax credit, it seems both individuals want to do. what is your base case gets done

if we have a divided government? mike: you can expect at least some of the kind of commonly supported provisions that are set to expire in several get extended and everything else goes to the wayside. we add up were commonly accepted provisions as to about $1 trillion of inca mental expansion starting in 2026. that's where we think the bipartisan angle is. for republicans we think that number could go as high as 1.6 trillion. democrats would be more willing to bring in revenue, that number could be like 500 billion, 700 billion instead. more in terms of the values and principles each party is bringing to the table. the decision -- precision on the numbers will fall. lisa: this is what we were talking about, we talk about the lack of clarity around some of these numbers that we get, details that are yet to be worked out yet they have come out saying trump's can increase

the deficit more than kamala harris. we have a number of republican strategists as well as people who, on the show and get very angry and then tell us we are not accounting for growth are coming off the heels of some of these tax cuts. why is that not being included in this? mike: there is a technical argument. the technical argument is the way the government will score any of these things typically won't count for incremental growth in dynamic scoring. so investors not having certainty on that particularly bond market investors organa discount to the present what is the expected deficit protection telling them, that can factor into supply. the idea future economic growth mitigating the deficit impact five years later feels quite speculative and it's not something you can work with from an investment perspective. annmarie: bank of america said

the most important debate of the year and the most important nfp. we still know all of harris's proposal spread what you most interested in trying to understand from her economic plans? mike: i would love to hear more precision on the tax and spending side. i don't think you'll get more of that from either candidate. campaigns a lot of times are about putting values out and expressing them in statements as opposed to specific policies because that will be more persuasive to voters. i personally have low expectations for us learning more precisely. jonathan: have you developed much of a sector focus or is it too early? mike: some sectors clearly benefit or benefit less in either outcome. democrats have more control of sectors the benefit from the ira. that spending is going to be more secure.

if you have republican sweep and therefore skew towards extending tax cuts, that skews towards the mastic industries, a little toward small-cap. it's one of the reasons when it looked like trump was good to win, you started see signs of life in small caps as things have gotten more. lisa: saying essentially when you look underneath the hood and this is what we heard from trump potential advisor that they will freeze some of that funding for the ira and end up really hurting particular areas which is the reason why you're seeing some shifting around the candidates. jonathan: speaking exclusively for the investor class, harris needs congress to do some of the high corporate taxes, trump doesn't need congress to do some of that stuff. they need to do some of the good stuff to offset the tariffs. things as they stand our harris needs a sweep and that means it's bad for markets.

and if trump doesn't get a sweep that's also bad for markets. fair enough? lisa: sure. what i find most interesting is regardless of whether it's good for markets or bad for markets it's when it will be good or bad for markets. essentially the sweeteners will come later because it will take longer. to me is indicative of will the trump trade looked different this time around. jonathan: good to see you sir. up next on this program, cleveland cliffs. a speculation grows over the future of u.s. steel. that stock is up by 2.8%. the jobs report 60 minutes around the corner. ♪

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no place for debris to get in at all. we install leaffilter on your existing gutters. you'll never have to climb a ladder to clean out your gutters again. you know, that's peace of mind and then some. so, how do people sign up? call 833 leaffilter today to schedule your free inspection. or visit getleaffilter.com jonathan: three days of losses on the s&p 500. here is day four. down by 0.6% on the s&p, a little by one percentage point on the s&p, the russell down by -- on the two-year and ten-year for that matter. we are down another three this morning. the 10-year. the last time that we were going

into the payrolls report a month ago come that had a four handle. lisa: the balance of risks, the reaction function, people talking about not just a 50-basis point rate cut this month but a series of them which we heard from citigroup and jp morgan. the question to me is, at what point does the fed worry about spooking a market that is already on edge? concerned about more significant weakness? jonathan: think about how much weight we have put on the bad data compared to the good data? i use the word bad loosely. let's talk about downside surprises on things like the adp. the adp was the weakest member since 2021. job openings the lowest since 2021. not the news you want to see if you're looking for higher bond yields. the services print is pretty decent. jobless claims, nothing to see here. we haven't spent a lot of time talking about them in the last 24 hours. lisa: the good stuff is being ignored because it is backward

looking at a lot of people say that the forward-looking indicators are weakening faster than people expected. we heard this overnight in a discussion with market watch. we heard this from mary daly. you get the sense particularly in the beige book that there are areas that are starting to roll over. that never happens literarily, to use a fantastic word coined on the show today. jonathan: there's only one currency pair we are looking at a: 30. the dollar-yen. yen strength for a fourth consecutive day. dollar-yen down for four days. back to 1.433 on this currency pair. the moves on august for a few days after the jobs report a month ago. lisa: wages actually increased more than expected even as they increased less than expected over the euro area and people are talking about the flagging labor market expansion in the united states. at this point, can we talk about converging cycles that benefit the end -- the yen.

that is what mark mccormick was talking about. how fast this has moved has been notable. you wonder how much the corollary washout has already happened? jonathan: the u.s. payrolls report for august under an hour away. calling for 106 to 5000 jobs added. the unemployment rate is expected to go down to 4.2%. one of the most important events this week was something that mike mckee mentioned earlier. he talked about at 11:00 eastern on friday morning being a key time. governor wallace is set to speak before the quiet period. however they frame with the jobs number is could go a long way to shaping expectations into the weekend at september 18. lisa: if you use is moderate, there is your 25. aggressive actions to get ahead of things? there you go. it is interesting to me it's coming at that point. we also get the 8:45 speech from

john williams. does this mean they want to give a signal to markets? or are they going to talk about vague niceties? jonathan: a lot of the buzzwords over the fed speeches, methodical, gradual. if you hear more of that after the jobs report, methodical and gradual to mean -- to me means 25. let's see what kind of language they use. i still stand by this. there is some daylight between the conversations we are having on this program and the language they are using in the fed speeches. they are talking about gradual. they are not mentioning things like once when he five or lower would mean that we cut rates by 50 basis points. that is something of the market's own creation. maybe they close the gap in those speeches later, but for now there is a gap. lisa: it is also been moving very quickly. we have to note that the data

has been moving quickly and the conversations we are having with people are moving quickly. i cannot think of a person who is talking about 150 basis points being cut in terms of the fed funds rate over three meetings just casually as almost a consensus call and noncontroversial one, yet here we are. it seems things are shifting pretty rapidly. jonathan: a great conversation earlier on this morning with dani burger and manus cranny, he has continued to say we need 125 on payrolls, four .3% on unemployment in this federal reserve goes 50 on september 18. that is a pretty low bar. lisa: you just need to see there is not payback from the july jobs report. that it wasn't a fluke or the weather. suddenly people will count it as something meaningful. that's the point he's trying to get to. jonathan: a union representing dockworkers from houston to boston saying that it will back a strike if the labor contract expires at midnight on september

30. talks with terminal operators and ocean operators have stalled since june. we will explore some of these issues for the ports across the nation. has gone through it himself. this is another sticking point for unions in the labor market in this country. annmarie: the timing could not be worse. it is ahead of the u.s. election and when you see these ports really start to have a buildup because of the holiday season. this could not be worse for the current candidate who is incumbent, kamala harris. sticking points are everything. automation, health care, retirement benefits. this is what we heard from the west coast. some believe the final agreement will exceed the west coast. they are willing to go. the timing is brutal. lisa: is is interesting to see the last gasp on the timing.

how much are they relying on the political pressure? two or three years ago there were strikes everywhere as wages were increasing at a rapid pace. this is the anomaly, not the norm. the power has adjusted more significantly towards the employer not the employee. jonathan: we have lost some labor leverage for sure. seeing some of these issues on the french. will they be things we see in the rearview mirror? lisa: i wonder how much of this is trying to leverage the political moment to say this is very good for us to get this done, so why don't we do this now and increase the pressure? not necessarily because of the inflationary pressure that gives them that ability. jonathan: reading the political tea leaves poorly are those in the steel industry. he is still in the market for u.s. steel. he is working on a plan to buy the firm if a deal with nippon s

teel goes through. walk us through how finely balanced this conversation has become after the u.s. steel ceo threatened job cuts if this deal doesn't go through. >> lorenzo doesn't really do delicate. let's put the comments aside for a moment. reports of a letter that detailed objections. the company doing all of the stuff they threatened to do or threaten, offering a nod to the calls for the company to be american run. they're trying to thread some kind of needle. and the threat, nice headquarters you got there, it would be a shame to lose it. they would pull up stakes if the deal falls through.

brushing it off saying that the bluster, the company won't leave, the plants won't close. now, it is a question of, when is it happening? we have reported this. governor shapiro pennsylvania said yesterday that there is officially some ongoing talks to protect those jobs. the question is, does that mean the governors trying to walk jill biden off -- joe biden off the ledge? it is a blackbox process. i'm hearing pittsburgh on the road with the vice president as she does debate prep. she weighed in on monday and hasn't touched it since. there are a lot of things swirling. biden has been clear he want the company to be american owned and run. is he bluffing? annmarie: he cannot legally block it until the review is done. what is the timeline to wrap up that kind of review?

>> officials have not transmitted the review to the white house. that doesn't necessarily mean they don't know what the decision is. they're not expecting it coming around the corner soon, but they need that to go there. we have learned experts over the nine months covering this that the panel will be unlikely to block a deal like this with an ally country. the final panel includes members of biden's cabinet. it is unclear faye split decision will be the case. do they throw up their hands ? that could be had as opposed to the whole process finding a problem. annmarie: where they usually do is it is a menu of potential actions that you could take. what are the national security concerns your sources are telling you about this deal? >> some have included the supply

chain. nippon steel has done downstream stuff in china. the question has been those. they are using that steel is a sector that itself is a national security concern. the trump tariff we have seen steel treated like a secret high-tech new thing that needs guardrails. the simple nature of u.s. steel being foreign-owned, national security if you ever needed to rely on these countries to import raw steel you would need from blast furnaces for roads and bridges. it is a broader argument that steel is national security rather than focusing in on what

are the plans for china. lisa: the more i read about the deal the more fascinating it gets. what is worse? the idea of international interference and desire to? have more protectionist policy or the potential monopolistic tendencies of specific industries like a cleveland cliffs acquisition that she is seeking to prevent? what you think is the emphasis? >> i think for her now and for the biden administration the last nine months, is union jobs, union votes. the steelworkers are against that. another thing here is if they try to buy some of these assets, the blast furnaces which are the unionized part, that will create a market consolidation with the auto sector. we have had pennsylvania' is lawmakers flipping out over this deal if you start messing with the auto sector.

michigan's lawmakers are flipping out in the opposite way. there is no clear alternative rather than u.s. steel remain u.s. steel.that is where the warning comes in. the new ceo is warning this week, these plants need investment.not only is nippon steel offering $14.1 billion they have offered 2.7 billion dollars in additional investment to get the plants going. without this deal we don't have the money to do it. read the writing on the wall. i should note, the allegations from the union is if nippon is willing to play -- pay the premium, they have equity abroad and are looking for a place to park it, the plan is to dump that in the u.s. into steel. it is tough. you have the foreign offer, you have staying independent, warning we don't have the cash to keep things going the way they should come and you have

with other industries like auto will flip out about. jonathan: thank you, sir. josh wingrove of bloomberg on the latest on the steel industry. let's take the opportunity to get a bloomberg brief with dani burger. >> larry ellison will take control of paramount global after a group led by his son david completes the purchase. the oracle co-founder is backing his son's a billion-dollar proposal. he will take almost 70% of the redstone families interest in the film and tv company. sherry redstone will get 180 million dollars in severance and benefits from the deal on top of hundreds of millions of dollars more from the sale of her stock. warren buffett extended his sale of the bank of america shares into september. atotal now $7 billion since he started selling two months ago. the latest round of transactions, berkshire hathaway equity dated the stock this week. if berkshire keeps selling its

stake they can slide below 10%, the threshold below we are holding reports are no longer required. he began building with a $5 billion deal in 2011. the boating starliner -- boeing starliner is set to head home without its astronauts as early as 6:04 eastern. in a statement nasa set the detailed checks concluded a homecoming can commence. that spacecraft is returning to earth after an orbit that began june 6 and was only supposed to last for 10 days before machinery problems were found. the astronauts are set to return on a february 2025 spacex flight. jonathan: there's lots to unpack. i still can't believe there are two people stuck in space and we are just like, eh, they're coming back in february. can you imagine buying an a billion-dollar company like that? -- 8 billion-dollar company like that? lisa: well, considering my personal experience. jonathan: can you buy me ac

milan? lisa: are you actually asking? please, someone out there, bless me with that. jonathan: slow fears mounting. >> what looks like a soft landing, what looks like a slow softening of the u.s. economy, tends to accelerate. jonathan: the view from bank of america, next. ♪

jonathan: the jobs report, 42 minutes away. softer by 0.2 percent on the s&p. bond markets down to her three basis points. on the surveillance, slowdown fears mounting. >>'s people are saying they are finding jobs harder to get. they are more worried about

losing a job. we will see an unemployment rate that accelerates higher. what looks like a soft landing, looks like a very slow softening of the u.s. economy, tends to accelerate. jonathan: august payrolls coming in 30 minutes. the bloomberg survey calling for 165,000 jobs added, unemployment to tick slightly lower. looking for a bigger print but remaining cautious. "we expect payrolls to rise by 200,000. despite our strong forecast, we don't think the labor market is accelerating. add to that the solid activity data and this leaves us comfortable with our base case of a soft landing." let's get into this. i have heard the weather come up in conversations. i have heard retooling plants in michigan. can you walk us through those issues and the payback that we could get in this report because of them? >> good morning. thank you for having me.

the issues, there were idiosyncratic factors that made the jobs report look weaker than it may have been. in texas it looks like a lot of people were on temporary layoff related to hurricane beryl. there is a similar story in michigan. we expect payback for those factors and that's one reason we think the unemployment rate falls back to 4.2% in 40 minutes. jonathan: another reason you think they go 25 basis points on september 18. what would change your mind and 40 minutes? what would make the 25 of 50? aditya: we think that if the jobs report is really, really, very weak. i'm talking double digits on nonfarm payrolls. so 50,000. the unemployment rate coming up. then they would seriously consider a 50 basis point rate.

governor weller will speak later this morning. it is important to remember that if they cannot buy 50 the markets are probably going to price more 50's down the line. in november and december. they have to be ready for that. that is rate cuts consistent with the recession. if you don't think that there is a recession you want to cut at a more gradual pace. jonathan: it is not really her take on what the market is pricing and she doesn't see the bond market saying that there will be a recession pricing and more cuts. the neutral rate will be lower and the federal get them more aggressively now because you have seen some deterioration in labor markets. why do you disagree? aditya: i would say that yes, it is possible that the market is pricing down the neutral rate. when the fed is cutting to normalize or doing a mid-cycle

adjustment, it cuts gradually. 25 per meeting or quarter. because it doesn't want to convey a sense of panic to markets. when you do that it is counterproductive. you're no longer supporting financial conditions because markets think that the fed know something we don't know. 25 basis points if you are normalizing. when you're cutting 50's you're not just cutting to get back to neutral. you are cutting to accommodate the economy. lisa: we have heard from guests that the labor market is quickly shifting away from being strong to something much less so. we were hearing from austan goolsbee overnight that he sees the data moving more than fed officials expected. what are you seeing in the data that seems to reject that? that points to stability and strengths? that flies in the face of the more extreme rate cutting

projections? aditya: a couple of things. the first is the resilience in consumer spending. the last four months, spending has accelerated. it is above trend. that suggests the income being generated, regardless of what you see in the official data, is sufficient. two, the solid demand should support decent job growth going forward. we have had a lot of catch-up employment growth in a few sectors, leisure and hospitality, health care and private education, and government. those sectors are slowing down. if you look at the remaining job market, it has been running flat. there is not a clear sign of deterioration. lay offs are still low. that gives us hope that the labor market is still normalizing rather than outright weakening. annmarie: when you talk about consumer spending is healthy,

why do you make of ceos saying that we see consumers being choiceful or picky? they don't have the same kind of impulse that we saw a few months ago? aditya: there is definitely going to be idiosyncratic companies and sectors that are more affected than others. in a trend-like economy, a good chunk is running below trend. that will affect certain companies. if you look at the aggregate data, which i think is the best we can do, things look a little softer at the start of the year but may, june, july were pretty good months. overall, all we can say is spending is holding up. there is the possibility that what you see in the stock market is not necessarily representative of overall consumer spending. a lot of consumer spending happens around consumer sectors. jonathan: i want to give your thoughts on governor waller who speaks ahead of the quiet period. what do you look for going into

the quiet period? aditya: we really like listening to governor waller, probably the second most important voice in the fed. he is very forthcoming in answering questions and very direct with telling you his view. we would expect if the markets are somewhere between 25 and 50, we would expect guidance from waller. close to 25 or 50, you've gotten a strong enough signal from the jobs report that you don't need waller to take a strong stance. there are some risks for the market, but that is not the most necessarily likely outcome. jonathan: you're one of the very best. looking for 200 k on payrolls in 35 minutes. lisa: talking about payback from the last report and ongoing resilience. we haven't talked about resilience to the prior month, to the prior several months.

what happens if they come in and downwardly revise some of the data points? these are messy numbers and have been moving quite a bit. jonathan: we haven't talked about economic projections getting an update. they have year end 2025 at 4.2%. 2026, 4 .1%. aren't we due a revision on that as well? lisa: especially as we are hearing date is moving or quickly than they expected. we are well through the unemployment rate. jonathan: and a brand-new. plot -- dot plot. a lot to get excited about. lisa: keep it down, jon. jonathan: jeff rosenberger blackrock. am i getting too excited? lisa: i know people who make dot plot cupcakes and pass them out. someone did that in the bloomberg news room.

jonathan: that is quite sad. should we name and shame? we will discuss in the commercial break and everyone gets to guess. this is bloomberg. ♪ ♪ [suspenseful music] trains. [whoosh] ♪ trains that sense what isn't on the schedule. ♪ trains that use the power of dell ai and intel. ♪ to see hundreds of miles of tracks. ♪ [vroom] [train horn] [buzz] clearing the way, [whoosh]

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>> if the unemployment rate

moves up again, if we get a significant rise, that will be a worrying signal. >> if we see a number closer to 100,000 this month we will have to reassess our view on the labor market. >> a pretty significant downside surprise to drive markets lower. >> there is no magic number. it is about the direction. we should expect to see more softening in the labor market. >> this is "bloomberg surveillance" with the jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: jobs report is 30 minutes away. the estimates look like this. 165k is the median estimate in our survey for the payrolls print. the jobs report just around the corner. the opening bell 19 minutes away. the equity market, a three-day slide. it looks like it could become four. down by zero .5% on the s&p 500 the nasdaq down by .9.

the bond market 20 basis point move on the 10-year and two-year. the rally in fixed income continues. lisa: to me, this is the most pivotal jobs report of the year. to me, this marks the difference in terms of the tone, tenor, and speed of the rate cutting cycle. people have doubled down on this the time has come to start cutting. where and to how quickly? jonathan: that has been the feeling for a while. we will need to gauge over the next 30 minutes to get a clearer idea of how low that needs to go to cement the idea that they go 50. lisa: what is the unemployment rate? does it come down or go up? that will determine other factors like, how big is the labor market? we aren't really talking about this, but we should. downward or upward revisions to prior months of data. we have seen a lot of messiness.

if they upgrade last month data to become better than it was, we don't have the same trend. if they downgrade it, what. all of a sudden you could get different language from chris waller. annmarie: on the heels of the downgrade we just had. it seems like we have this spectrum of 200,000 on the payrolls increase, that is 25. we heard this morning, he expects below consensus new jobs, unemployment holding at 4.3% to be enough to go 50. it is that range on whether or not it may push the fed. jonathan: it is not a big range. let's be clear. 4.3 percent unemployment, 114 on jobs signal or noise? can you point to factories in michigan retooling and weather issues in texas as a reason to expect big payback and 27 minutes? those looking for 27k tight numbers, that is what they are expecting.

lisa: the readthrough for the longer-term trajectory. the 200,000 crew believe in the soft landing. they believe what we've seen in the market isn't something that will be more protracted, deeper, and nonlinear. people who see 125k and a greater chance of recession are those who see a quickly moving market to a different, lower shift. to me, that is why suddenly you have citigroup talking about suddenly this fed is not taking baby steps on the way up, why should it take baby steps on the way down especially if you see deterioration rear its head? jonathan: equities obsession lows in the s&p 500, down by .5% in the bond market yields lower by two or three basis points. the currency pair to watch is dollar-yen, four days of yen strength. how much more can we generate off the story in the u.s.? lisa: also the other side. quite a bit. you have raised this issue before. have we blown out all of the longs? are we done with that trait?

could that be a disruption of 10 to august 2 when we got the other labor market report when we saw a pretty big leveraged trade position? jonathan: a late start to the weekend for those of you in japan. good evening, tokyo. coming up, why markets can continue to grind higher. and a growing chart of a growing september cut. and reacting to the jobs data. we begin with our top story. august payrolls are out in under 30 minutes. the data is expected to determine the size of the fed's next move. saying the soft landing remains on track. we continue to expect the fed to start rate cutting in september. base case, 100 basis points in 2024. nadia, good morning. the last time we were with u.s. before the payroll print on august 2. you're talking about a soft landing. has anything changed with the

data we've had between those conversations? nadia: largely we would not say anything has changed. there isn't anything indicating the economy is de-accelerating on an accelerating pace. we are watching payrolls given the july. what we hear from corporations, we are hearing broad-based slowdown. i know there was a consumer conference this week. what i'm hearing from our consumer analysts is that the tone has been constructive and seeing positive data points coming out of consumer in august. jonathan: you expect growth to hold up, why are you all in on small caps and discretionary? nadia: our view on small caps has to do with the sustainability of any earnings growth in small-cap. a lot has to go right for the small-cap to work. some of it has already run ahead of itself.

small-cap needs a manufacturing part of the economy to cooperate. we haven't been seeing that in terms of the manufacturing. it has continued to be weak. that is why we lean into large-cap because of the secular growth. while a say the economy is not coming to a screeching halt, it is slowing down. 2% growth is good but small-cap needs the fed to be more aggressive in reducing rates for it to work. lisa: i can hear in the back of my head all of the people calling you up, should i buy all of the nvidia i possibly can? nadia: absolutely not. we take a balanced approach. reality is, yes, parts of the economy are still feeling the pressure of our restrictive monetary policy. we think that it's important to anchor in secular growth in tech, add cyclical in financials, and defensive exposure in utilities. now, we are in the space where you want to be more balanced. yes, the data is a little murky.

lisa: i want to go back to where you expect the federal reserve to cut by 100 basis points this year, yet still see a soft landing, still see the s&p 500 inning at 5900 -- ending at 5900. can you square the ideas that the fed could cut pretty aggressively and that doesn't necessarily mean that they see real trouble? nadia: yes. in terms of the 100 basis point cut, a lot will depend on payroll. where we sit today, we will know in a few minutes, it feels like it is more of a 25 basis point to start off. we want to maintain that optionality because we know that the data can shift quickly. the 100 basis point cut could be more 75 basis point cut. in terms of the corporate side, you're seeing corporations holding in q2 earnings beat expectations. you're not seeing much downward revision to the forward

estimates. that is why we think that this market can continue. right now investors are on edge. so far it has been a good year. you could see people continue to take profits. we think the next couple of months will be volatile. once we get into third-quarter earnings and q4, we think the market will regain its footing. jonathan: would you like for right now? nadia: we continue to like tech, but we expect some volatility in tech. we have been encouraging investors and clients to get the shopping list ready. what is on the shopping list will be quality. we will be leaning into ai logic chip names and some of the foundry names.we think that the ai story is intact and continues to move higher. there are questions on the return of investment capital but you are seeing use cases.

we did hear nvidia say that 40% of its data center revenues over the past 12 months is tied to model usage and return on investment capital. walmart talked about using ai for their projects. that would be 100 times more headcount they would need if they didn't. we are seeing evidence of it. lisa: one uncertainty we have seen people struggle with is how much rate cuts will support further gains in equities. there is a possibility it could be 75 basis points of rate cuts. there is the possibility of 150 points of rate cuts. would that be bad for stocks? nadia: yes, we think so near term. it would suggest something is breaking or is broken and the fed needs to accelerate.we want the rate cuts to be a marathon, not a sprint. if we are in a sprint the equity market will react because now there are concerns about what that means for corporate earnings and growth going forward.

if you get between 75 and 100, that is probably more palatable to equities than if you get 150 basis points. lisa: one of your least preferred sectors is real estate. we have rate cuts happening around the block. on top of the fact that washington, bipartisanship, talking about the housing market. what would it take for you to like real estate? nadia: we would need to see the estimates come down more. real estate has started to perform better and i think it has run ahead of itself in terms of anticipation of rate cuts. there are capacity issues within real estate, but that will filter through the earnings. we think there is more downside to earnings. in terms of the other areas that we are cautious on our materials. we know that that is tied to china. it is coming in weak. we are not seeing any real pickup in industrial volume. those are two areas we are more

cautious. jonathan: it is good to see you. going into the jobs report 20 minutes away. whatever the number is, it has been overestimated. we have asked this question so many times. should we chop off 60k or 70k? lisa: that is why we go to the downward revisions. how much will that matter? just as much as the actual headline number we get today? jonathan: chairman powell throwing cold numbers -- cold water over some of these numbers. talking with some figures being overestimated. 165 revised down to 80 or 90. lisa: 60,000 was the average. he knows something we don't know. jonathan: chairman powell? what do you think? 50 is something to worry about? lisa: i've heard both.

on one hand if the fed is aggressively or incredibly tight and restrictive, why shouldn't they go quickly? why shouldn't they get down to a level that is closer to neutral to adjust to adjuster where the economy is going? then you have, going aggressively on the way up didn't turn out well so maybe baby steps would be warranted. you have both coming out. one of the most interesting questions to me is, if they cut 50 basis points, is that negative for thoughts? jonathan: i like the thought exercise. a blank sheet of paper. you ask yourself, what is the right interest rate for this economy given the inflation rate and trend of jobs. lisa: if you came up with the more likely 4%, would you be ok with saying why not reset it there now? jonathan: looking for 165 on the unemployment rate to decline to 4.2% from 4.3%.

let's get an update on stories elsewhere. dani: former bank of japan governor kuroda signaled the boj has more room to raise rates. the nominal neutral rate could be less than 2% after their most recent hike key rates at a quarter of a percent. he joins other ex-officials that say rate hikes could be faster than most expect. dollar-yen around 143, lower than the aftermath of the jobs report. abc reporting that president biden is set to sign an executive order today for federal grants that prioritize projects with organized labor. biden will make the announcement at a union trade center in ann arbor, michigan. the campaign has been trying to shore up union support. along with labor agreements the grants would prioritize projects with wage standards and benefits like access to childcare and apprentice programs.bloomberg

has learned that intel is weighing the sale of part of its majority stake in mobileye. intel could offload 80% of its holding on the public market work via sale to a third-party. mobileye has a board meeting this month where intel's plans will be considered. jonathan: in about 30 minutes, next on the program, morning calls and looking ahead to the payrolls report with mike collins. that payrolls report is 15 minutes away. ♪

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jonathan: the jobs report at 8:30 eastern, looking for 165k.

the unemployment rate 4.2% is the estimate against last month's four .3%. equities negative by zero point 5% on the s&p 500. in the bond market the rally continues. first up ubs lowering his broadcom price target and keeping a buy rating. guidance fell short of expectations lower by more than 7% in the premarket. the second call from j.p. morgan downloading to neutral. saying that it needed more time to assess its internal controls. this has been building for the as part of the week down by 2% in early trading. keybank is lowering its price target on verizon to 44 and keeping an overweight rating following the announcement of the frontier communications acquisition. positive by a quarter of 1%. the focus is firmly on the

august payrolls report a few moments away. the bloomberg survey is looking for 165k and unemployment dropped to 4.2%. we're joined now for more. it is always special to catch up with you on payrolls friday. welcome to the program and good morning. the focus for you and the team what are you focused on at 8:30? michael: this could be a market-moving jobs number, jonathan. if it prints based on expectations that you showed on the screen, i would bet that short rates back up a little bit. there are a lot of rate cuts priced in. right now as of this morning, the funds rate that is priced in one year from now is already down to 3%. that is 230 plus basis points of rate cuts in 12 months. it almost feels like you need something more than what we are seeing, which is a gradual slowdown in the economy. a gradual weakening of the labor market. to get those kinds of rate cuts, it feels like you need something

worse than that. the front end could backup a lot if you get a surprise on the upside because of all of these cuts priced in. if the number prints below 100, the front end rallies. i guess you could continue to see the curve. and in. but there are a lot of cuts priced in. jonathan: whatever the number is, the bond market is bought either way. that is the bias right now and fixed income. you sense the same thing? michael: that has been the bias and rightfully so. the economy feels like it is weakening quickly here. it has been on a moderating slowdown, and it feels like maybe we are hitting this inflection point where demand is coming off harder. we have some big international trucking companies reporting really weak numbers this week. that is a typically good leading indicator for economic activity generally. the manufacturing sector broadly

feels like it is in a recession. the labor market is usually the last thing to fall. we looked at data this morning. historically, the recession happens when the job number turns negative. the job number is not a leading indicator. it is a slightly lagging indicator. inflation we are not even talking about anymore. it feels like it is stuck at 2%, maybe indefinitely or going lower. the bond market has been rallying because of this data. there are a lot of cuts priced in. if you get an upside surprise you could get a selloff in the front end. lisa: you're making an argument for why the cuts make sense. it goes to the feeling like maybe we are going back to the environment we left of the neutral rate being substantially below where we are currently.why not get the fed to move more quickly to get closer to that to avoid

that falling off of the cliff moment? what is the argument against that? what number would you have to see to get behind some of the cuts you are seeing priced in and then some? michael: if you see the number come in as expected, i wouldn't be surprised to see some rate cuts come out of the market. now, there are over 100 basis points of cuts priced in. more than 150 basis point cuts. there is a 50% chance of a 50 in the september meeting, so pretty aggressive cuts. that said, you are right. like i said on the program last time, the funds rate should today be closer to 3.5% than 5.5%. if the fed could snap their fingers and get it down to 3.5%, they would probably love to do that. financial conditions would ease significantly, so they have to be careful. they are cognizant of financial conditions. yields on the corporate bond

market were at 6.5% not long ago. they are 4.75% today. we are getting back to much more historically normal levels. companies are issuing like mad. you're seeing a pickup in m&a activity. definitely the animal spirits are alive and well and the fed has to be careful. lisa: if i'm extrapolating out too much, you are seeing that the fed goes as aggressively as the market is pricing in you run the risk of reigniting inflation and overheating becomes once again in the forefront of our minds? even with this economic data and the trucking companies reporting disappointing earnings? michael: it is difficult to see the economy go higher again, to overheat. it is difficult for us to really see inflation start going back up again.

obviously, the fed is worried about that. there are a lot of reasons why inflation could be stickier. you have geopolitical risks that seem to be getting worse and not better. a political situation could spur more economic activity and cause inflation to go higher. tariffs etc., there are labor shortages around the world. the energy problems, the energy transition and climate risk. there are a lot of reasons to think that inflation could be stickier. the fed is focused on that. it feels like inflation is moving in one direction. it is toward 2%. the markets feel pretty balanced. the 10-year treasury feels fair value to maybe full. we would look for opportunities to buy and duration if rates back up from here. the trend as you said have been run away so far. jonathan: who gets the trophy? what is it for? michael: hopefully me, jonathan.

this is our annual golf tournament. i am looking to take it home. jonathan: good luck. michael collins, thank you. find out what they are really into going into the weekend. payrolls, super serious. golf tournament. lisa: how quickly does the tie come off? jonathan: the golf shoes are ready to go. mike mckee is in the studio. do you think that wall street is overdoing it? michael: yes and no. it matters a lot for wall street. you are making asset bets on what you think will happen. i think i have pointed out to you earlier that the fed is not saying that they are data point dependent and this will make their decisions for them. we were talking in the green room about how this will matter for a few days. all of a sudden we will talk about the s&p, their forecast

for the future. that will matter going into the fed meeting. it kind of goes by. i pointed out that more americans are worried about what taylor swift wore to the chiefs game than the jobs report. lisa: surveillance is concerned about the jobs report. let's focus on that. we are focused on the statement of economic projections and how the leap report -- the labor report fits into that. jonathan: five minutes away. equity futures decline on the s&p 500. a little bit softer. the bid in bonds begins to fade. lower by not even a basis point at the front end of the curve. mike mckee breaks it down, jeff rosenberg of blackrock and slok of apollo. this is bloomberg. ♪

jonathan: the jobs report, 25 seconds away. the scores look like this, equity futures on the s&p declining by 0.50%. the nasdaq 100 down by .80%. let's look at the yield curve, two-year, 10, 30 year, down a basis point on the two year. 3.72. 10-year, 3.6967. we are looking for 165 for the jobs number. here's mike mckee. michael: somewhere in between.

that will make a dilemma for wall street. 142,000 jobs but the unemployment rate takes back down to 4.2%. revisions over the past two months down 86,000. we will have to see with the breakdown of that is because if you took 86,000 away from last month's low number, you will not get much. average hourly earnings up .40%, stronger than the two times from july and even higher than the 3/10 anticipated. weekly hours rise to 34.3. if you are looking for some sign that the economy was slowing but we are not yet laying off people, we would look for hours to be cut back. that is not what is happening at the moment. i will break down more of this. tell us what the markets think. jonathan: i was hoping you would carry out so i could make sense of it. off the back of this, the bond market got sold and immediately

bought. down by eight basis points on the two year. it is the first move. this is the second on the 10-year, down five basis points, 3.70. that is the bond market picture. in response, dollar-yen dropping to 142. near session lows on the currency pair. the equity market turns positive initially and then dropped back again on the s&p 500, down by 0.50%. the nasdaq back to 0.90%. these numbers will not solve the debate in any way, shape or form on wall street this morning. lisa: definitely not. one aspect speaks the loudest. i'm biased because this is what i thought going in, the downward revisions and the fact that last month, already negative, will go there were 89,000 is significant. that will cause the fed to have

a more difficult decision, but you are still seeing that priced into markets. this fed will be headed lower on a more aggressive path. jonathan: the bad news, last month was worse than we thought. good news, unemployment dropped from 4.3 to 4.2. good or bad? michael: yes. depends on what you are looking at. this doesn't make the case one way or another, which would leave you with a default of 25 basis points. job growth is slower. we have to break that down and figure out what is going on with that. unemployment rate falling back tells the fed we are not losing a lot of workers in the economy is not falling off a cliff. lisa: this shows me messy numbers, and the path is moving downward. that has been a consistent path in terms of revisions. our revisions getting maybe a bigger look in this cycle because it has been a noisier set of data post-pandemic? michael: i suppose they are getting a bigger look, but you always get revisions and they

follow the trend, where it tends to be negative, the economy grows. where they tend to be positive, the revisions are going to be negative. that will not surprise anybody at the federal reserve. basically, what they are looking at is how many people have lost their jobs and why. that is the question we have been trying to answer. last month, we saw a huge number of people who had lost temporary jobs and were on temporary layoff, and that number has dropped back tremendously. it was 1,062,000 in july, and now it is 872,000. we are looking at a change of 190,000 lower and that suggests that the july numbers in terms of unemployment were kind of a one-off. jonathan: we've been debating with jeff rosenberg what would

be the most confusing labor market report for the fed today. he said something like if you have got a slightly softer jobs report, unemployment dropped back from 4.3 to 4.2, jeff, that is the mix we have got, so jeff rosenberg of blackrock, make sense of this. jeffrey: yeah, tough to make sense of it. it is a bit of a mixture. i think the headline reaction is to the slightly weaker payroll headline. and the revisions, as lisa pointed out. it is weaker on margin. the bond market is behaving as if we price it, they will cut. so increasing the probability trying to push it to 50. i don't think this report is definitive on the 25 versus 50. i think it will be waller. jonathan: what would you like from governor waller? do you think that is the final voice that sets up whether we go

25 or 50? jeffrey: i think it is. i think it is set up on the calendar to give mark its clarity on what the fed will do. he will have had the information and a chance to talk to powell. so you don't get a big market reaction the 18th, when the fomc meets, so i think it is intended to provide a little bit of a steer to the markets. i think that will be as important as the number that just dropped what we get in terms of reaction. it is hard to say which way they go. the market is pushing for 50. this number is not particularly weak. you have the potential of a first printed bias on the headline and maybe that gets revised up. we are talking revisions. this is a weirdness in the data where it tends to be weaker. there is a slowing and an argument on both sides that if

they do 50, does that signal too much concern? they could talk around that, they could talk about 50 and their confidence in the economy and ease the concern. the market has been right in the middle between the two. this morning, it is about the revisions and a little bit weaker relative to expectations with consensus around 65 and a little below that. lisa: as an investor, what is your response mechanism to a fed that signals 50 basis points in a rate cut? is it extrapolating 150 basis points of rate cuts this year and that will be questionable for risk assets? or do you say this is supportive? because that means they will adjust quickly back to something the market things is more neutral. jeffrey: yeah, we had that debate yesterday. i think it is a tough one. typically when the fed cuts for, they are cutting 50 because there was a growing deceleration in the economic data. this is a tricky time because

you have a lot of focus on the labor markets and the labor market deceleration as being the leading indicator. it is kind of a coincidence. the rest of the economy look strong, but there is a fear that the fed is behind the curve and that the rest of the slowdown is coming and the rise, in terms of hard landing fears, so 50 my kind of push people along that direction, so it is more of a negative rather than the fed is on the job. it is, oh, the fed is behind the curve, the 50 basis points validates our fear, and then you have issues in terms of risk, high valuations and concentrations in terms of valuation and the tech sector all feeding to a lot of angst. even what we saw last month in terms of the outsized market reaction, positioning on august 2 and fifth, i think the risk here is that 50 could be more of

a negative signal than a reassuring signal that the fed is on the case, but it is a tough call either way. lisa: we had the debate yesterday, what was your reaction given the fact that the fed does not have proprietary data we do not see that points to a more conclusive signal about where the economy is headed? jeffrey: it is about the fed's shift. it has shifted this whole narrative focus and really market reaction focus onto the growth data away from the inflation data. that shift means the fed is worried now more about securing the benefit of their past policy intervention to secure the benefits of reducing inflation and now focusing on securing the soft landing, so any signals around their sensitivity, any validation of that in terms of data makes people very much on edge that you are back to what

powell called the era of flouted rules that you cannot rely on the rules like labor market to differentials and other things people .2 that you have recession signals, and this time those might be the right signal. that kind of concern you see in commentary and forecasts gets more validated under a 50 basis point scenario. that is the concern that would be the pushback. they can signal around that, use the language on the press conference to manage that, but it is a tricky needle to thread. jonathan: jeff rosenberg of blackrock, thank you. 8:45 we will hear from john williams and then later this morning, governor waller at 11:00 a.m. it was a note before the number that whatever the number is, it

is being overestimated. when we talk about the austin the market, lisa talked about revisions and that is what neil is talking about. lisa: the idea that you could see more downward revisions. when you have a slowing economy or a slowing labor market, the revisions tend to be to the downside. if that is the case, doesn't that edify the sense that we are slowing? it sounded like jeff rosenberg did not have a conclusion to the debate in terms of how they will respond. jonathan: there is no conclusion. lisa: there isn't one and that's the issue. people don't know how to deal with this, but you are seeing a jittering us with yields markedly lower. jonathan: i can tell you with the bond market is doing a yields lower, down nine basis points. moments ago, we took out the august 5 loan, dropped to about 363. 364 right now at the front end of the curve, double-digit basis point move and on the 10-year, down to 367. equities are curious because

what you see in the picture, you think that the bad news is the bad news and equity futures are doing ok for now. lisa: which is essentially what a lot of people hope the fed can navigate, which is a 50 basis point rate cut which is being priced in this month with the positive. they are adjusting rates more quickly to a neutral rate, not responding to an emergency situation. jonathan: mike, what jumps out? michael: i will further and say that john williams and fowler will do 25 based on underlying numbers, which are good from the fed's point of view, aggregate with the hours, up .30% after falling the prior month, used as a proxy to figure out gdp. when you look at the unemployment rate, the level change in the labor force was up 420,000 the month before, and the number of unemployed went down after 48,000 in the household survey while the

number of unemployed went up 68,000. we already mentioned hours worked. not only did it go up in general, but manufactured hours worked went up, so it does appear that the economy is still fairly strong, and this matches what we saw. companies are not getting rid of workers, they are not hiring them either. if you are the fed, there does not seem to be an emergency. jonathan: they've got two benefits, one, you have an extra 12 minutes to get over this -- go over this, and do you agree? >> let's look at the payrolls. unemployment rate in august was better than july, earnings higher than in july, and average hourly earnings was better than july. the economy is not slowing down the way the market anticipates. we will not get eight cuts over the next 12 months.

this report is really telling you that there is a soft landing jonathan: jonathan:. in october when we look at this report and get another revision, a downward one, don't we have to reflect on the conversation and say everything keeps getting revised lower? this is lisa's point the last few days. this labor market is weaker than we initially thought it was. torsten: gdp in the second quarter was revised up, jobless claims continues to be good. continuing claims was also good. if you look at the daily data with how many people go to restaurants and fly on airplanes, if you look across the board on bankruptcies, if you look on credit card spending, in the aggregate, the growth data is not showing signs of a slowdown. the labor market is weakening, and the data has been a little bit more unbalanced, as the federal say, but the notion that the economy is slowing down rapidly is misguided. lisa: i was speaking to retail executives at the conference

this week, and the biggest question was, what is going to happen to the consumer? they had zero visibility and did not know, even though you are seeing some signs of weakness, they said ultimately it depends on whether they have the money to spend. the labor market reports are raising a red flag for a lot, saying if they lose their jobs, they will not. how fragile is the happiness you are describing a scenario like that? torsten: the unemployment rates went down, that would be a problem, but look at what they did say, the target is set, no sign of a slowdown, and, also, costco, no sign of a slowdown. broadly speaking, looking at retail sales, monthly, weekly, and across the board on credit card data. the bottom line of this discussion is you only get a recession when you have a big

shot to the economy and that makes sense with covid and the lehman brothers going over, that blessed of the i.t. bubble in 2000 -- bust of the i.t. bubble in 2000. this is engineered by the fed, and now they are telling us that it amounts to lower rates, so that is going to counter negative things. jonathan: we are getting another headline from the fed. mike mckee, from john williams. michael: john williams is saying it is time to join the party. he is not commenting on his repaired remarks about today's numbers. he would not have had them ahead of time, but he says it is time to cut rates with the economy now in equipoise, which he titled his speech, that means in balance, and inflation passed to 2%, it is now appropriate to dial down the stance of policy by reducing the target range for the federal funds rate. so the vice-chairman of the open

market committee is saying we are going to cut rates. he is not yet talking about by how much but there is a q and a. jonathan: and apparently with a thesaurus over the new york fed. torsten slok, what do you make of that? torsten: i think waller will also give more guidance in terms of what is going down with the bigger economic picture but i don't think he will tell us whether this is 25 or 50. it requires an important debate, given the spectrum recently in the speeches. some are suggesting we should have fewer cuts over the next several quarters and others are suggesting we should go faster, so i think they need to gather and think hard about would be like to go to 25 or 50? i would say that 25 is the right number, given that everything in the report was better than july. lisa: would it be policy error to go by 50? torsten: that opens up the debate on how far we need to go down. we would need to go to real

rates plus inflation, if we need to go to 4.5, we are not far away, so there's no rush. if we need to go down to 2.5 or three, give me the incoming data. it is still good. why is there a rush to cut rates dramatically other than the framework which says we have to? lisa: the speech was about understanding the effect that fed policy has on the overall economy and the conclusion was we do not know and we don't have a sense of how quickly it gets and how many of the effects we are starting to see. there is an argument that if you cut rates more effectively, you can get ahead of effects we have not seen. why don't you give credence to that? torsten: because there are three important reasons why we did not get the slowdown we anticipated throughout 2023. there is not a hike in 2022. consumers and firms locked in low interest rates, i -- ai investment had been strong, and

all of these things combined with a key reason why the economy has not slumped down and a lot of people still have low interest rates and mortgages, investment grade credit, fixed-rate locked in for a long time, so if they stop cutting rates, the transmission will be weaker on the downside. it was weak when you raised rates, so because of that, ai investors are still strong, and infrastructure are still strong. this argues that the data will continue to be steady over the next several quarters. there's no reason to expect this and there is no shock signal to what they seem for previous recessions. dani: if you take -- annmarie: if you take off what you did for august, you get 117, would you still feel this way if it printed that number? torsten: we've seen modest slowdown, but broadly speaking, it is better than july, so

particularly with the unemployment rate, which is especially important when you put that into your tailored rules and figure out the reaction and how it benefits, that is the forecast, and if the unemployment rate goes down, it is hard to argue if we should go 50. to go 50, you need an economic argument, i ne -- i do need to get going, and if monetary policy is instructed, does not look like it is. if it was, the bond report would be weaker. jonathan: this is what i wanted to finish with the, you are saying 550 is still not that restrictive for the economy? torsten: if the terminal rate is 4.5, is 5.5 far away from 4.5? i know we have been somewhat not quite brainwashed but fomc members continue to say we have normalized -- have to normalize rates. if we had restricted monetary

policy, why have we for 2.5 years and counting still been getting little economic data, including gdp and the second quarter at 3%? what is the reason for that? ai is still strong, fiscal policy is strong, we have locked in lower interest rates, where is the significant transfer of monetary policy? jonathan: in 12 months time, what you think rates are? they have a four handle, a five? torsten: i think they will be higher than what the market is pricing because this shock is not generating a recession. why haven't we had a recession of 36 months and counting? it is the case that the economy and economic data has been better than what anybody predicted for the reasons i mentioned. ai spending is dependent on whatever the fed is doing. jonathan: this is box office, and we should do it again next week. torsten slok of apollo, thank you. the data is

better-than-expected, if you look at the totality of the labor market report. yields are lower because the fed will reduce interest rates. equities started to inflate a little higher. if you would like tomorrow's prices, i would like to know if equities close positive on the report. lisa: it is saying to the fed that they can cut by 50 basis points and still signal it is not because things are falling off a cliff. we will stay stressed out with all eyes on the fed. the faster they normalize, the less they have to do, and they can keep the soft landing alive. do not know if they are there yet. jonathan: next on the program, a big week ahead. the debate continues. nothing has been settled around this table. from bloomberg -- from new york, this is bloomberg. ♪

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jonathan: everybody needs the

weekend, counting you down to the opening bell. 36 minutes away. governor waller, 11:00 a.m. eastern time, i had a blackout period. important stuff before the fed goes quiet. monday, apple, tuesday, vice president harris and former president trump in their first debate. wednesday, u.s. cpi. thursday, ppi and jobless claims. and and ecb rate decision. friday, u.s. sentiment. final word around the table. lisa: does the cpi matter at a time where the focus is on beginning in the labor market? that is my real question and whether the fed's into 50 basis points -- fed liens into 50 basis points. annmarie: next week, we have the u.s. presidential debate, the next market catalyst. will it really be a arc it catalyst and we get details from either candidate?

jonathan: and the last payroll we get to, the debate, coming up, bank of america, and jim bianco of beyonca research. we have said that it is a pivotal jobs report. it is decisive and has settled nothing on wall street. the debate rages -- wages on -- rages on. lisa: it was more decisive for a neutral rates. this will be an ongoing discussion. right now, you see a laborer economy that is downwardly weakening and that continues to do so. to me that needs to be really focused in terms of balance of risks and how the fed responds. jonathan: the revisions appear to be a trend, which is why john williams has said now is the time to reduce interest rates. equity markets about unchanged. the bond market is rally. yields lower by five basis points. the two year, 4.69. the 10 year, 3.71. we have a normalizing yield

curve. thank you for choosing bloombergtv. this was "bloomberg surveillance." ♪

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bring on the good stuff.

matt: a big but not seeing a drop in futures. 30 minutes until the start of trading. katie: bloomberg open interest starts right now. sonali: job jitters, u.s. hiring remained tepid in august as the unemployment rate ticked lower. matt: everyone placing fed bets.