>> we are looking for a driver on payrolls. >> it is important for us to also acknowledge that labor markets are going to be noisy. >> it will be difficult to get a clean read on the signal. >> the labor market, while solid, has slowed down quite a bit. >> the bottom line is the labor market is actually pretty healthy. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: live from new york city, good morning, good morning. bloomberg surveillance starts

right now. coming into friday, taking off november, seriously. s&p futures positive by one third of 1%, leaving behind the first month of losses since april on the s&p 500 here are two words to watch this morning. apple and amazon in the premarket. apple, attempted forecast, a bit of softness in china, down 1.2%. amazon is flying up 6%. lisa: to mean, this highlights the story of this tech earnings season coming down to which tech company can convince everybody that when it spends on big tech it has a path to profitability on the backside? apple, given that it is falling off in china and it had a messy roll with ai, the software and hardware, people don't have that faith. annmarie: they do when it comes to amazon even though aws came in shy. when it comes to apple, if this is how bad it is for them now and they are not being able to live up to expectations, how bad could it be if the politics

change in the united states and china becomes more difficult for an american company to do business in? jonathan: the tech story will be a sideshow, the main event is around the corner. yields look like this, higher by single basis point at the front end, 4.18. on tens, 4.2947. the median estimate is 10k. bloomberg economics, below -10k. lisa: how low does it have to be to change the narrative? the positive surprises that have led to a 50 basis point rise in the 10-year yield. on the two-year yield, it feels like it just happened and we are still in october. it raises the question, has the narrative been set? especially given the fact that this jobs number will be a pick your number, a basic grab bag of what you want because it will be so messy. annmarie: even without the hurricane and bowling impact,

150,000 could have been added because they see underlying issues with the economy, things like manufacturing. what would be an absolute shock is if we print a higher number. what does that mean for the federal reserve next week? jonathan: the random number generator drops at 8:30 eastern time. is the risk a big number or small number? this week's data, the lowest jobless claims yesterday. adp delivering an upside surprise. the labo differential and consumer confidence improving. so far so good for october. lisa: which is why given the low expectations for this jobs number that a lot of people are saying that the risk is to the upside given the rise in yields and surprise index, which is at its highest level going back to april. it is messy if it is low. is it messy if it is high? i don't think anyone is saying that that is the case. jonathan: coming up, a week full

of event risk. harris makes a final appeal to female voters. and apple's disappointing earnings report here and we begin with stocks inching higher going into the first of three events, payrolls this morning, the election on tuesday, the federal reserve meeting two days later. "historically, it's the prevailing trend of the s&p that matters more for forward performance than the election outcome. uptrend going into election, strength tends to carry over. down trend, going into election, weakness often persists." what does this performance tell you about how we will perform coming out the other side of next week? chris: we don't know what is going to happen next week but we know that the market has been positive for two years and i would expect the continuation of that. even the last couple of weeks, the market got choppy and we haven't seen the internal deterioration that i would expect ahead of the big problem. i don't know if you get a correction or pullback

postelection, but the leadership is still pretty good. the internals are good as well. jonathan: we talked about the procyclical discretionary, what is happening with financials, what does that look like now? chris: we say we care about how the markets interpret the economy. even as rates have backed up, you haven't seen leadership move away from the procyclical tone that has been in place for much of the summer and fall. discretionary over staples, a procyclical tone. they have held their own even with rates up. i think, conversely, look at the markets' more defensive areas. no money into health care and staples. i know that the macro looks different with rates up. i don't think that the leadership looks very different. that is more important for us. lisa: sentiment feels very nervous. the single day moves after earnings don't make sense in the

scope of how big they are based on the actual numbers. microsoft, it wasn't that bad, the shares fell the most into years. apple beat across the board, but people are saying show me the money in the future. then you have a massive surge in intel because everyone left them for dead. how much are we looking at a market that is so jumpy with no conviction that you are seeing massive single name moves? chris: it's interesting that you're talking about a sector that has been split for six months. tech is probably the one sector in our work for you have seen internal weakness show up over the summer into the fall. microsoft, for example, we should never be surprised by an outcome when the surprise is the direction of the trend. microsoft had been weakening all summer and fall. it peaked in july. we shouldn't be shocked by that outcome. the semis, find a group that is more split. where is asml, samsung?

tech is probably the most split of any sector in our work. lisa: i love you're talking about specific stories. is macro broken down, the bond-start correlation is divorced? and you can't gauge anything by that? chris: there is a lot about the move in bond yields about the last couple of weeks, but i would put it in a little bit of context. i don't think the people realize this. it sounds counterintuitive but is historically true. following rate cuts they go up. you had about a 75 basis point higher over 12 weeks that ultimately resumed lower. i think importantly, as well, as rates have gone up, what hasn't happened is there has been no weakness in credit. triple c spreads are on the low. maybe a hint of spread widening, but for the most part credit conditions aren't confirming the move in yields. lisa, as you noted, the surprise index has confirmed the move in

yields. i know that the front page of the new york times on saturday and ft on saturday was about the move was about trump odds. i'm not so sure. the data has been pretty good and the cyclicals are working as well, so i see better data and cyclicals outperforming. i don't think that the market is as agitated about the move in yields as the consensus is. annmarie: is there any trump trade in the rise in bond yields? chris: you sought manifest in the bank stocks. they have been consistent leadership basically going back to june, when it seemed for the first time that the character of the race began to change. we have done some work. what was the best group from election day 2016 to the end of that year? i don't think that we will get that kind of same impact if trump were to win here, because a lot of it has been pulled forward, but that has been the manifestation. annmarie: couldn't that be choose your narrative since financials also had a good earnings season? chris: yeah, let's are never the

following. all year, 95 percent of financials have been in uptrends. regardless of what the news is, expect the outcome to be in the direction of the trend. if we want to associate it to good data, good earnings, or trump odds, the bigger story is that all of the internal work on the sector and globally -- even the european banks where there is no election are holding up remarkably well. jonathan: what does the rest of the world look like compared to what is developing stateside? chris: there is a very antagonistic view on china. i see and in my meetings, internally and externally, where you even hypothesize that maybe china is getting better and you get a lot of pushback. the thing that set out to me the most pronounced is chinese consumer discretionary is outperforming chinese staples by a massive margin. you tend to see that coming out of a recession or when the data will not get worse. i wonder if that is the inflection?

i want to watch things like aluminum, zinc, european autos and luxury. can they dig into good numbers? you have terrible numbers from european autos and luxury. can they bottom on that? is that some message that the rest of the world will start to turn here? lisa: are you seeing that bleed into european optimism where deutsche bank put out a note basically saying that the odds of negative rates are rising again? it is going back to deflationary cycle time. chris: i hope not. if there is one thing that has been overlooked the last few weeks in europe, it is that the markets corrected as european cyclicals have gained foothold against european defensive's. if i was going to look for things that may suggest the rest of the world is gaining or could gain economic momentum here, i would look to the leadership. the leadership is starting to look more procyclical for the first time all year. jonathan: have we seen the

kitchen sink moment for the autos in europe? how much more bad news can you throw at some of these names? chris: clearly, the answer has been no until maybe just recently here. i think that the european bond yields are important. remember, they have moved as well without the election that we have here. the move in yields is all about the election, i think that is a mistake. jonathan: the u.k. has its own problems for sure. it is great to catch up. an update on news elsewhere with your bloomberg brief, here is dani burger. dani: shares of apple are down in the early trade 1%. the giant failed to impress investors with the quarterly earnings report that predicted tepid growth for the holiday season. apple sparked fresh concern about revenue growth and lingering weakness in an intensely competitive chinese market. they posted a decline in china revenue last quarter and fell short of estimates. boeing and its leaders representing its largest unions

have reached a tentative deal to end the strike that is now in its seventh week. the agreement would boost wages by 38% over four years and give workers a signing bonus of 12,000 dollars if approved. the union urges they accept the offer and don't risk losing gains after weeks of collective bargaining. the union plans to vote on the proposal monday. the blockbuster 2024 world series lived up to the hype according to the ratings numbers reported by fox sports. an average of 15.8 million people tuned in each night across the series. that number spiked up to 18.6 million for the decisive game 5 you that makes it the highest rated world series since 2017. it makes it a major boost from last year's series, which averaged over 9 million viewers per game. the doctors will have their championship parade later this -- the dodgers will have their championship parade later this evening in downtown l.a. lisa: everyone agreed that it

was crazy. you have a good outcome, go riot, it makes no sense. jonathan: we will catch up with you in 30 minutes. next, the agenda divide. >> i will do it whether the women like it or not. i've got to protect them. >> it is actually very offensive to women. he does not prioritize the freedom of women. jonathan: that conversation next. live from new york, good morning. ♪

(♪♪) ♪ well i was raised by careful hands ♪ ♪ yeah, they made me who i am ♪ ♪ so i'm off to see... ♪ we invent them. we design them.

we build them. and one day, we have to let them soar. ♪ i'm always coming home ♪ jonathan: it is payrolls friday, equity futures on the s&p 500 are higher by .3% in the bond market yields are up a single basis point. the 10 year, 4.2947. the gender divide. fmr. pres. trump: i want to protect the women of our

country. they said, well, i'm going to do it whether the women like it or not. i'm going to protect them. jonathan: donald trump bound to protect women. kamala harris snapping back. v.p. harris: i think it is very offensive to women in terms of not understanding their agency, their authority, they are right, their ability to make decisions about their own lives, including their own bodies. he does not prioritize the freedom of women, and the intelligence of women to make decisions about their own lives and bodies. jonathan: the gender divide at the epicenter of this election. harris campaign officials touting higher turnout from women then men across battleground states, women making up 55% of early voters in swing states. a demographic that the vice president performs much better and then the former president. we are joined around the table in new york, david, good morning. how important will the divide be? david: huge.

white women in particular are 33% of the electorate and reliable voters going to the polls on election day. getting them to do that for the democratic party and to support kamala harris is a huge deal. a look at this gif donald trump has given the harris campaign. this is an issue that the harris campaign wanted to lean into. that comment from him brings up a lot of memories of 2016 and what donald trump said as a candidate to chris matthews about punishing women who sought abortions. it raises fresh this idea that reproductive rights are on the line this election and brings it back to where the harris campaign wants it to be. annmarie: white women are the largest voting demographic block. 47% voted for trump compared to hillary clinton.even more white women voted for trump in 2020. do they not trained for him now in 2024? david: i think that the harris campaign sees them as a block that they should have more of and should bring to their side

you bring up that history and i think that it's real for the democratic party. i think there is a school of thought that you have a woman with a viable shot at being the first female president, why are not more women supporting her? it speaks to the fact that there are still a lot of women who supported trump in the past who may be feel like they should again enter having difficulty. lisa: i had deja vu. the harris campaign said, we've got something that we can hook into and talk about. women's rights and independence. then mark cuban says, trump does not have strong, intelligent female supporters and all of a sudden people are thinking, is this another deplorable moment? yeah democratic proxies insinuating that if a republican woman votes for donald trump she is somehow bad or not strong and intelligent. how much does that setback the campaign? david: this has to be deeply frustrating for the harris campaign, that remark and the remark from a president biden.

they are keen to have all of the surrogate's and incumbent president sitting more on the sidelines. people are talking about it, but it has been ping-pong and back-and-forth with remarks like this. mark cuban try to clean that up in the face of the trump campaign chairwoman saying there are strong women in his campaign. both of these campaigns continue to step in it the last few days. jonathan: i see more videos of cuban then harris day to day at the moment which is bizarre. annmarie: speaking of that comment, we never hear from susan wiles. she does not tweet. she tweeted yesterday. jonathan: we're joined now for more. rob, your thoughts. millions authority voted. we have any clarity on how that vote has been breaking? rob: we have clarity in the sense that we have good data

coming out of the early vote. a number of states report partisanship, gender, race breakdown by county. within that data, even though it is good data, we haven't seen clear trends. women are turning out more than men, good sign for harris, but turning out about where they were in 2020. it is not a clear better or worse than the biden-trump matchup. annmarie: the nbc news decision desk has female democratic voters in pennsylvania, that influx. the flipside is, what about the male vote? new male republican voters in arizona, two key critical states. rob: arizona is where harris is running weaker. weaker among latino and male voters, which is a national trend. the blue wall, harris is less impacted by both of those, primarily because of the white women who david was just discussing, white women turning out in droves for harris at a higher percentage with a better

margin for harris than 2020. lisa: they will both be in wisconsin today. how tight is that race? rob: really tight. we feel good that harris will win the presidency because she is running clearly headed in michigan and wisconsin, but across the swing states, if the polling today does not clearly show that they are tied, every poll has been within the four points, the average margin of error in presidential cycles between 2000 and today. all of the races are tight. harris is leading in wisconsin and michigan. lisa: we keep talking about how tight the polls are, yet there seems to be a growing conviction in investors that it is not going to be a contested election and drag on for a significant time. you can see this in the options market or the volatility peaking the day after the election and petering off with the idea that we will have a clear outcome.

how is that correct? is that also your base case? rob: it is our base case. we think that we get a clear result in the first 48 hours post-election. it may not be that the associated press is calling the election in the first 40 eight hours, but the markets and those looking at the election most closely will have a good sense, as we did in 2020. the betting markets moved to biden wednesday morning. even though it took until saturday for the associated press to call the election, the markets priced in the biden win on monday. in 2016 and 2020 essentially all of the swing states went from one candidate or the other. trump and then biden. we think there will be some polling error, that most of the swing states will break from one candidate or the other. even if there are outstanding legal challenges, they won't be significant enough and the margin will not be tight enough for them to matter a lot.

lisa: you said something important because i've heard it echoed by other people, there is probably a polling error. what could that be? a lot of people say it feels like something is off at the polls. rob: unfortunately, i don't have an answer in terms of direction. we feel as though there will be polling error, there is always polling error. the polling was good in 2022, but we've heard from clients that polling will underestimate trump because it underestimated him in 2016 and 2020. we have seen posters make changes to their collection process and their sampling process. we think that will probably see a polling error if we are lucky. two to three points if we are unlucky 48 points. it is hard -- two to three points. if we are unlucky, four to eight points. annmarie: if jill stein was not

on the ballot, hillary clinton could have clinched michigan. is that what gives you confidence about wisconsin and michigan? rfk is still on the ballot in those key states? rob: the third-party question is interesting. third-party candidates hurt clinton in 2016 and hurt trump in 2020. it's true that jill stein in michigan will probably run beyond polling because she sort of serves as a proxy for arab-american voters and progressive democrats who are unhappy with the biden administration's handling of the middle east. nevertheless, rfk remains on the ballot in michigan and wisconsin come as hard as he is trying to get off of the ballot. he is pulling between 1.5% three percentage waits nationally today. i don't know who those people are who think they will still vote for rfk. they are not paying attention to the news given that he has clearly dropped out and supported trump, even though he remains on the ballot. it's important to consider that the only third-party candidate

on the ballot in all seven swing states is chase oliver, the libertarian. he will pull more votes from the right wing as well. i don't want to overstate it. it's not a lot. third-party candidates are unlikely to make a huge impact in this race, but we are hearing a lot about jill stein and it's important to look at the other side of the aisle on the ticket. jonathan: a final word from you. on election night, if there is one thing to watch, what is the one thing that you will look at? rob: we are hoping to get results from north carolina early. most of the results from georgia early. one other thing is kamala harris outperforming in urban areas among all voters, but primarily black and latino voters and young voters. if she can outperform their end among white women, the election is hers. jonathan: giving harris the edge. in an hour from now we will hear from someone who will say completely the opposite. he believes that may be trump has the edge. i'm not sure how it will be this

morning. equity futures on the s&p 500 are doing ok. apple down 1% in the premarket. we will catch up with the latest results from apple. in the bond market, year-to-year and a 10 year coming off of the back of a major monthly move. 50 basis points higher on 2's and 10's. your 10-year, 4.29. the jobs report is two hours in five minutes away. the estimate in our survey is 100k. from new york, this is bloomberg. ♪

jonathan: payrolls report two hours away. equity futures on the s&p 500, the nasdaq, the russell of one third of 1%. getting a lift from amazon. we will talk about the earnings later on. yesterday that decline snapped the winning streak on a monthly basis on the s&p 500. the first monthly loss going back to april. to the bond market. two-year and 10-year up around 50 basis points apiece in

october. 10-year up to 429.47. we've had upside surprises in the labor market. we have had a month of repairing for a weaker than expected jobs number. all of a sudden you get this thought. could it be stronger than everyone's thinking? lisa: if it is stronger, people can't discount it because they explained all the reasons why should be weak and you have to strip out thousands of jobs for the strike in the hurricane. it is unclear and probably unlikely the fed is not going to cut for 25 basis points. look at certain aspects of the jolt report. it raises questions about how much momentum can continue regardless of how much turmoil happens. jonathan: noise versus signal. noise, weakness. let's get to the commodity market.

up by 2% on brent. a report from axios citing israeli sources it did not identify that iran might be preparing to attack israel from a rocky -- iraqi territory. annmarie: using proxies to go after israel. this was leaked to axios. it immediate the hit the oil market. would iran want to do that before a consequential u.s. presidential election? they potentially want to see things in the us base -- u.s. be -- this would be something very difficult for the administration to handle. jonathan: it would be carried out using drones and ballistic missiles. a real surprise for the market in the last few hours or so. boeing and union leaders reaching a tentative agreement to end the seven-week long strike. the latest proposal would boost wages by 38% over four years and

give workers a $12,000 signing bonus if approved. the vote is set for monday. the stock is up by 2%. we have seen this movie before. lisa: the vote is coming up in a number of days right before the election on november 4. from the union this was interesting. every strike there is a point where we have extracted everything we can. we risk a regressive offer in the future. basically, people are saying this is got to stop. annmarie: third times the charm. they came back last week. 64% voted no. they need to get at least 50% basically, more than 50% to get the say yes and bring the numbers down. they say it is time to lock in the gains and declare victory. if they don't do it now i'm not sure what boeing is willing to

give up. jonathan: they are hurting themselves more than helping at the moment. that is why the stock is up by 2% in the premarket. the latest data out of the world's second-largest economy indicates it has stabilized somewhat following beijing's stimulus push. exceeding analyst expectations with home sales seeing the first rise this year. the early signs of things starting to bounce. lisa: people think yes. this is an honest question. is this is basically the same areas that could stimulate before? to housing in the manufacturing sectors. people want to understand how much firepower the consumer has to go out and really spend to expand the economy. without that, how virtuous of a cycle can this stimulus have? we will have to see on november 8 when they come up with the big bazooka or not depending on who wins the election. annmarie: when it comes to the u.s. election, goldman sachs

says potentially that means china will have to move towards internal domestic consumption. they will have to if there is a 20% tariff on trump. xi jinping said china is entering a period where strategic opportunities and risks coexist and unexpected factors are rising. jonathan: the numbers out of china has not been great out of a range of industries. starbucks, apple. a bit of weakness. let's turn to attack and talk about amazon. third quarter earnings that beat expectations. the eight of yes cloud division, on-time real -- aws cloud division, the stock is up more than 6% this morning. a trifecta of beats for amazon. lisa: in this overwhelmed in them spending $75 billion this year.

give other big tech companies had come up with such a massive number they would have been punished if they weren't showing the path to profitability. amazon showed the path to profitability with an increase in their aws platform that had been flagging and operating on all cylinders and suddenly it is fine. that is the take away from this earnings cycle. if you show the path to profitability, show us the money, by all means spend away. jonathan: it is hard to bet against certain parts of the u.s. economy when the biggest cash machines on the planet are delivering a major boom. -- capex boom. lisa: you are seeing that and what can i jobs they get created. what issues get opportunities for investment with respect to private capital. how much is that the overlay in an economy that might be tepid and certain pockets but this will drive it forward? jonathan: amazon up 6% in early trading. apple shares lower following

earnings. tom writing it is off to a slow start given the performance of the september quarter and december quarter sales guidance for only low to mid single digit growth. welcome to the program, sir. what is going wrong at apple? tom: the ai fueled super cycle does not look like it is a super cycle. there are two data points that are muddying the water. the first was the mismatch of the hardware and software rollout to the extent they launched the iphone 16 but only recently in the u.s. did they start rolling out software, capital intelligence. government -- apple intelligence. it remains to be seen if they will roll that out in china. the other muddying point is china. you have a weak economic environment and that is negatively impacting apple

sales, which is 15% give or take of the total revenue. if there is a super cycle it is off to a slow start. jonathan: why wouldn't it just be a super cycle delayed giving we know at some point the ai could be just around the corner? tom: if you look at the analysis when we anticipated it would get half the boost they got for the 5g super cycle, that analysis suggested iphone sales will be up nearly 12% in fiscal 2025. they reported 5.5% growth in the december quarter. they guided to the low single digit to mid single digit total revenue. the indicated services would grow to about 12.9%, consistent with weir group in 2024 -- with where it group in 2024. 5.5% for the iphone does not feel like a super cycle. lisa: are we watching them fail

at ai or rollout it in a way that can be tangible and juice the replacement super cycle? tom: it does feel a little like the fifth inning of the yankees earlier this week where they had a great idea with apple intelligence but not able to execute on it and made multiple mistakes with the rollout. yes, i think that is resulting in them underperforming their big tech peers when it comes to exploring ai. lisa: let me guess, you are a red sox fan or mets fan. tom: cubs. lisa: i'm curious about who the dodgers are in this scenario. spicy a -- i see annmarie shaking her head. who is taking over for apple? tom: i think amazon is ours who

is best exploring artificial intelligence. who is taking over for apple is the chinese smartphone players that are doing much better. that is a challenge for amazon. perhaps the parallel is tesla in ev's. as far as who is best positioned to exploit ai, it's amazon. annmarie: we will ignore the fact you are pouring salt of my wounds this morning. i want to stay in china. does apple have a problem with the ai timeline and getting consumers excited, or are they losing ground to national champions? tom: i think it is the ai timeline. it is possible it will never be in china. you think about the influence of the government there. why would they want apple to roll it out? i'm curious to see how it plays out. i think that hurdle is very challenging for the company.

annmarie: even if they team up with a local partner? tom: let's say they team up and provide either the chinese version of apple intelligence or some sort of light version. the challenge we forget is there is essentially a new iphone unit every fall. if they don't cross the sales at the launch and don't cross the sales through the quarter, the consumer waits for the next one, ai or not. that could result in either slower developing super cycle. jonathan: dan ives is quiet this morning. we will try to make that happen one day. tom, thank you. you have been far too kind to aaron boone if he is the tim cook of the situation. annmarie: you're killing me this morning. lisa: i think you just want to see dan ives come in with this skinny tie and black suit and say this was not great.

jonathan: apple is only down 1%. lisa: i don't think he's going to do it. jonathan: equity futures up by one third of percent this morning. the update on stories with dani burger. dani: a recap on oil major earnings. chevron and exxon delivering better-than-expected results. both higher premarket. higher oil production from the permian basin helped offset a drop in crude prices. a weak quarter for refining. chevron indicated potential job cuts are to come with a new cost-cutting plan. $3 billion in cost savings will come from asset sales and the use of new technology and workflow changes. intel shares are surging premarket 5.5%. they gave a fourth-quarter revenue forecast about vestment -- above estimates. >> we laid out a strategy. we reaffirmed that with the

board of directors. we have taken the steps this quarter and restructuring and getting cost where they need to be. we have the capacity to go on the journey. dani: in the prior quarter, intel cut jobs and suspended investor payoffs. elon musk staving off a challenge to his $1 million voter giveaway. a judge says the judges on -- the cases on hold when the federal court decides to take the case. it comes after the philadelphia district attorney sued, saying it violated consumer protection law. that is your brief. jonathan: more from dani in about 30 minutes. they are running out of time to deal with that. lisa: if they want to deal with him before the election, yeah. they better get moving. people are receiving this checks that signed a. jonathan: absolutely amazing. looking for signs of weakness. >> the pendulum swung too far and people got too breathless

over a couple of weak months of jobs data. we are not deteriorating. jonathan: the data for october has been pretty decent. looking ahead to payrolls next on the program. ♪

jonathan: equity futures up by 131% following a month of losses in october. we kick off november and resume the climb on treasury yield. approaching 430 once again. i want to finish on crude. it is up to percent. -- 2%. axios citing two as really sources that iran might be preparing to attack israel from iraqi territory. there's a premium being billed back into the commodity market.

wti brent crude up by 2%. looking for signs of weakness. >> you look at the job openings data from where it was when the labor market was tighten -- tightest, there has been some cooling. they are fine. the pendulum swung a bit too far and people got too breathless over a couple of weak months of jobs data. we are not deteriorating. jonathan: the payrolls report dropping in two hours after month full of disruptions. the federal reserve tasked with separating the signal from the noise. wells fargo expecting a sharp slowdown. while the pay will print will likely understate the current position of the jobs market, we see strengths -- strains under the surface that point of the jobs market softening further in the near term. sarah, the task is to separate the signal from the noise. how will you identify your cyclical weakness given the

disruptions we have seen through this month? sarah: there are a couple ways we can do this. i think we will be looking where the unemployment rate. that will be more insulated from some of the strike affects and some of the hurricane effects. if you were employed, not at work due to the weather or labor dispute, you are counted as employed in the household survey. other places i'm looking at the revisions. we had a nice positive net revision last month. does -- do we see the first consecutive back to back positive net revisions in two years? i think you can still parse out some of the effects from the industry data. if you are looking at what industries are most exposed, some of the hurricane effects, things like construction, leisure and hospitality, we can set aside manufacturing. what happened in other industries that give us a better sense of how the trend is holding up now? lisa: is this the least important child-support report ever because of how muddy it is?

-- jobs report. sarah: the strike affects will be easy to parse out. that will account for 41,000 jobs. you can basically add that back in. the hurricane numbers will be a little bit messier. there is still a wealth of data in the report. there's a lot of information. the household survey. a lot of information from the subsectors. things like temporary help employment. while it's maybe not going to be the most straightforward report in a while, i think it is going to be important when you think about where the fed is and the cutting cycle. it could carry a lot of weight. lisa: if the unappointed rate comes in it for .1% as most seem to expect, there is a sense the economy is still strong on a collective level even if there are pockets of weakness that are showing up in a number of surveys. how do you parse out whether this is sinfully economies within the overarching economy

that are having recessions, having booms, and the aggregate is something this pretty good even if not great? sarah: when we look at the unemployment rate, if it stays at 4.1%, yes, this is up from the start of the year and from the cycle low. overall, that indicates a pretty solid state of the labor market. in terms of the bifurcation of seeing stresses, one area we have seen is it's a good labor market still for those workers who have a job. we see layoffs remain low. we have seen it become more difficult if you either were one of the unfortunate workers i got laid off or coming back into the workforce. it has gotten harder. we see bifurcation in terms of where you still have some of the outsized demand for it. it is more in your skilled trades, vocational, some of the lower scilled -- skilled

leisure and hospitality jobs. you are seeing a split between what is happening with wage growth between some of your lower paid workers where wage growth has been holding out for some of the higher-paying industries. some bifurcation even if in the aggregate we are looking at a pretty decent jobs market right now. annmarie: we talked about transitory factors when it comes to the hurricane, the boeing strike. what cyclical factors are you worried about right now? sarah: i'm concerned about the overall stance of borrowing rates. yes, even as we see the fed cutting. rates remain elevated where they were versus the early 20 20's and relative to the last cycle. there is still some strain on some businesses in terms of the interest expense where they are having to trim around the edges in terms of employment. will we see layoffs remain low? there's not a lot of hiring going on. you have businesses essentially in a holding pattern.

while that points to some stability for now, it keeps us in a precarious position where you don't need to see much of a shock to see further deterioration. those are some of the things we're looking at. annmarie: the lowest estimate comes from bloomberg estimates tha -- at -10,000. they say it could be 50,000 to 90,000. what could be more of a surprise to the market? a negative print or something that comes in closer to that surprise september report? sarah: the risks around the report in terms of interpretation are what we can take away from it. if you get a much stronger than expected payroll print where there is a depressing effect from the strikes and some depressing effect from the hurricanes we saw over the survey period.

if you were to see another strong payroll print despite those factors, i think that would be pretty telling. we are seeing more signs of labor conditions stabilizing. lisa: neil richardson of adp said something interesting. i never of employers are waiting until after the election to decide whether or not to hire people, if they will expand and what conditions will be. they want certainty. how much are you factoring that into some of your models/ sarah: we have looked at that before. you really don't see discernible difference between hiring pre and post election. i would not discount some employers are thinking about it. in terms of the aggregate we have not seen a lot of evidence that moves the needle. maybe it is having some effect but i don't necessarily think that is what has been behind some of the -- setting september

aside the weaker payable prince we saw in the summer. -- prints we saw in the summer. jonathan: good to hear from you on this payroll friday. it will be interesting to see how the market responds to it. i have a high degree of confidence and how the market will respond to a strong print. the assumption things must be really strong. if it is weak, we will have a bigger debate about whether that is just noise or some real cyclical weakness, essentially the point that sarah is making in the conversation. lisa: and trying to strip out how much are these effects and do you make it an excuse and say that doesn't really take away some of the huge rise we have seen in yields for a myriad of reasons. it is not simply the economic data. one messy data point people have been throwing shade that is not going to change the narrative. it might highlight crystallize it. i don't see some sort of wholesale feeling, ok, we're either off to the races or down

in the dumps. jonathan: are people looking for an excuse to buy bonds? who steps in front of this before next week? not many people do. there's not much reason for yields to go higher but doesn't want to step in at the moment because of the event risk next week. i have much greater confidence in how we will respond to strength. a weaker payrolls report, i'm not so sure you can sit here with any real degree of confidence and say we will sort of shoo thataway. lisa: i guess long-term investors who believe the trend will reassert itself regardless of what happens next week will probably use it as an opportunity because how many people have you heard say you will have another opportunity? guess what, it is back on. jonathan: we will speak to another one of those in a moment. priya misra joining us on the program. isaac boltansky, ellen zentner, rob sockin of citi coming up in the next hour of "bloomberg surveillance."

♪

>> the people are going to decide this election as of today who have not made up their minds yet. >> they are confused about what is going to happen on tuesday. >> the idea either candidate will get everything on their wish list is a limiting factor. >> there is so much unknown about exec bewitched policies will get and limited. -- and limited. -- implemented.

>> this is "bloomberg surveillance." jonathan: the payrolls report 90 minutes away. equity futures on the s&p 500 positive by .4%. similar move on the nasdaq 100, higher by 0.45%. a 50 basis point pop through a two-year and 10-year. 10-year just short of 430. estimates look like this. the median 100,000. below, -- of the low, -10,000. lisa: we have no clue about exec we have the market will respond to said jobs report because of some of the other issues that are here. this is peak uncertainty and it raises the question of what kind of signal we can get from any kind of trading and any type --

of any type because people are so jittery. we don't have a clear framework right now. annmarie: the jobs reports have been difficult. even jay powell himself told us to mentally adjust to the lower end. bloomberg economics thinks it is more than 60,000 or 70,000 you have to swipe off based on not great data collection. they state is more like 91,000. the numbers were difficult to understand and digest, then you add two hurricanes and boeing. very challenging when the market comes out. jonathan: hurricane noise. jobless claims. adp upside surprise. the labor differential improves after deteriorating for months and months. in the month of october it improves. lisa: maybe we can get more of an upside surprise that would be treated more realistically because you are backing out on the weakness anyway and still getting this number. what is interesting is will people look past it?

in part because of the employment cost index we got yesterday. it is not necessarily surging. do we start to care once again about inflation that seems to have been left for dead as a talking point for the federal reserve? jonathan: equity futures up .4% on the s&p 500. coming up, we catch up with priya misra on the possible path to higher rates. isaac boltansky as the presidential election enters its final days. and we will speak with ellen zentner on what can be a messy payrolls report. we begin ahead of a busy stretch financial markets worldwide. u.s. payrolls report coming at 8:30 eastern time. election day is tuesday and a decision two days later. priya misra writing, "a strong payrolls report and the republican sweep mean higher rates and at some point that can pressure risk assets." good morning. priya: good morning. jonathan: 50 basis points higher

over the last month. data or politics? priya: i would say both. the move in the 10-year to 4% was really data. prior two months we had these weaker payable reports. i talked about at the last couple of payroll reports with you. we were in a soft landing. every market is pricing in the soft landing. if you look at the july and august report there was notable deceleration. then we get this last report with revisions and strong 250. we took that downside surprise out of the market. i would say the last 25, 30 basis points is the market starting to price in real risk. we have to adjust for that hike in strike impact. anything above 200,000 is going to make the marketfield -- market feel that is where the market is pricing in. we have the big election coming up. the market is starting to price

in pre-acceleration supply concerns -- re-accelerating supply concerns. jonathan: what would set the -- upset the easing bias of the federal reserve? priya: they tell us we are normalizing. we are at 5% on fed funds. if we were at 4% we would be having that debate. if the economy is fine, not decelerating further, if you look below the surface there is a bifurcated economy. you have been talking about it. the signals are mixed. the datable fit any story -- the data will fit any story right now. we are in a soft landing. soft landings are rare so we don't actually know how to price that in. for the fed let's look at inflation. they told us clearly the 50 basis points that i think was inflation -- the payroll slowdown, the fed said it is inflation.

wages today will be impacted by the hurricanes. look at bce, cpi. it allows them to cut a couple of 25's. if the market is not showing deceleration or reaccelerating, they might be stopping earlier than what is priced in. the next few cuts are baked in the cake. lisa: he said something fascinating. there are supply issues coming with respect to the election. you have the three-year option before the election, the 10-year option the day of. all these bond supplies coming out. we could have a whole deal of uncertainty. the risk of re-acceleration and a host of investors who don't to get involved and step in front of a train before an election that could be consequential. how messy could these be? priya: the market has created value. when we look at rates, that is the one market that is pricing in the neutral rate. it has gone up above 350.

it is closer to 375. the market has moved pricing. we look at the trump trade or the red sweep trade and we look at 2016, nobody was talking about that. you have always talked about the debt. [laughter] you were not saying it's a big problem. the market is so different on inflation, on fiscal. that is what the term premiums have risen. will options be risk events? absolutely. i have never had -- when i was a treasury analyst people cared so much about treasury auctions. it is because they are risk events, market clearing events. i think it will all be risk events. we are looking at how much actually increasing debt are we talking about. his productivity picking up? if not, we should think about this market as a rates rise. if it is a real rate increase it will crowd out investment. it will have an impact on every

other market if the 10-year rates keep rising. lisa: there's a lot to impact with the fact were once an analyst and head of a group analyzing things and now you are buying. the question if you have conviction to buy at a time when we get a downside surprise or a sense of weakness. will the fundamentals be in play another this overlay of deficit concerns i've had for a long time and some may have become much more center stage? priya: the simple answer is no. i don't have a lot of conviction on duration. if i look at spread sectors in a soft landing, it is mixed. look at the bottom up data. there is bifurcation in companies but overall companies are not real every -- re- levering. it is giving you some yield. it is giving you hedge protection. that hedge starts to go away.

if we have more debt, i'm not sure we can be back in the 2022 timeframe where the hedge between treasuries and risk assets went the other way. i would stay away from duration. once the election uncertainty which i hope for all our sakes is gone next week, we know what the outlook of the government will look like, we can ask your correlations are back. if you look at a lot more supply coming in, stay away from duration. think about spread product. companies and a large part of consumers are very strong. annmarie: when it comes to the yield, if both harris is talking about spending and the former president? priya: the numbers are different in terms of how much increasing deficit will happen. the center for responsible budget says $7 trillion over 10 years versus $3 trillion. the other is the chance of a blue sweep.

it seems lower than a red sweep. people are pricing in the condition. if you get a trump presidency, you might get a red sweep in which case they can get a lot more of a fiscal front. people are projecting the supply numbers much higher. annmarie: if i get a republican senate, you will get tax cuts potentially. what if it is a red sweep? how higher do yields go? priya: people look at 2016. i would argue we have already sold off. if you look from 20 to a month out, that's a big increase in rates. the knee-jerk reaction will be much higher rates. i am more interested in risk assets. i think risk assets which have done great -- the s&p is up 20% this year -- will look at rates and say that is going to hurt. the entire soft landing is in tengion -- depends on the fed cutting rates. they are not cutting anymore. the recess gets -- risk assets,

we get more nervous. above 450 it will be a problem. jonathan: do you include china and that? -- and that? -- in that? priya: when high-yield and stocks start to struggle, yes. that one point it will affect ig. when i look at company deck levels, they are not high. ig might be isolated but the technicals have been keeping ig spreads, investment grade spreads type and the technicals can step away as well. why do think locking in fixed income at 6% is great for the treasury itself? jonathan: we had a guess from morgan stanley who suggested maybe ig could trade through treasury yields if you get concerned. priya: i struggle with that. you look at countries that have had debt issues. maybe the u.s. is that special. if the government spread is a

certain amount, i would say every corporate should be a spread on. it could be a tighter spread and i think the market is reflecting how tight ingress meant -- investment grade spreads are. if you look at the risk-free rate at 4.5%, you will want more to take on a less liquid, higher credit risk product. jonathan: we will see you again on election night. priya misra of jp morgan asset management. dear bloomberg brief with dani burger. dani: amazon reported stronger quarterly earnings. shares higher at 6.5% in the premarket. aws regained momentum in the third quarter to recover from record low sales growth last year. online retail sales also grew by double-digit. so did revenue at the fast-growing ad business. amazon projected strong growth ending in december. nomura bank announced it ceo

will take a pay cut after the firm admitted to employee manipulating the japanese bond market. local news reported a former employee was arrested on suspicion of robbery and attempted murder of elderly clients. the scandal overshadows up beat across the board in its quarterly performance. economist at goldman sachs are cautioning donald trump's proposed tariffs would shift china's approach to stimulus. the tariffs would force beijing to simeon -- stimulate domestic demand and focus on the consumer. china has identified shrinking demand as a key challenge since 2021 and repeatedly vowed to remote consumption. that is your brief. jonathan: more from dani in 30 minutes. up next, the last big push. >> we are fighting for a democracy. fighting for a democracy. >> if we can keep that sheeting

down, we will have a tremendous victory. jonathan: live from new york city this morning, good morning. ♪ ♪

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and assisting bank tellers on the edge. watsonx helps you deploy ai wherever you need it. so you can take your business wherever it needs to go. ibm. let's create. jonathan: the jobs number one hour and 15 minutes away. equity futures posited by .4% on the s&p 500. the last big push. >> at the top of my list is bringing down your cost of living. that will be my focus every single day as president. i will give a middle-class tax cuts over 100 million americans. we are here because we are fighting for a democracy. [cheers] fighting for a democracy. >> i think we are leading by a

lot. if we can keep that cheating down, because they are a bunch of cheats, if we can keep that sheeting down we will have a tremendous victory. jonathan: both candidates holding their final campaign event into the last weekend before election day. more than 60 million voters already casting their ballots, equaling around 40% of the total vote back in 2020. isaac boltansky writing, "the election effectively appears to be tied. we still view trump as a very slight favorite to win the white house." welcome back. let's get to the final point. why you believe trump has the edge. isaac: we just need a mental model to enter the election season. so many of these data points can become a choose your own adventure. you can get caught in some of these headlines and some of the narratives. i have tried to focus on what

impacts those swing state voters -- with the swing state voters say is going to lead to them choosing who they vote for. they have continued to say the economy and immigration. that is my mental model. i can make the case for harris. this is effectively a tied race. i need to have some framing device for how to think about who is going to show up at the polls in those seven states that ultimately going to decide the election. annmarie: the tea pollster in the trump camp would agree with you. and axios scoop said the internal memo circulating the trump world is president trump is on the verge. is this for internal consumption? is this for external? isaac: i feel like so much of this right now is we need something to talk about. we have 100 10 hours until the polls close in pennsylvania. who's counting? 110 hours. we have to have something we can talk about. . the election is close it is going to be tight all the way through the wire and we will

probably have litigation thereafter. we need something to talk about which is why we are spending a fair amount of time talking about internal polls again and talking about early voting data. we are grasping for some semblance of stability in what is going to be a pretty volatile few days. annmarie: what are you seeing? the nbc news decision desk has analysis on state voter data and saying there's been new female democratic voters in pennsylvania but new mail registered republican voters in arizona. how are you sifting through all of this? isaac: i think this is a wash. what i have seen so far is republicans are able to anger hat on the fact more republicans are early voting than ever before. when you talk to republican strategists, that is what they are excited about. democrats are incredibly excited about the gender gap. we are seeing more women voting and some of the swing states were you have that. both camps are able to keep on

their talking points. i look at it as a wash. first and foremost, early voting has never been a good predictor. i looked at 2016. early voting in west virginia showed the democrats were voting 12% more than republicans. republicans ended up winning west virginia by 40 points. it's never been a good predictor. because you are a democrat going to the polls does not necessarily mean you are voting for harris and vice versa. i have been trying to downplay the impacts and predictive power of the early voting data. annmarie: i would love your thoughts on unforced errors from both sides of the campaigns. donald trump it comes to the madison square garden and the comedian who was not very funny, and of course the sitting president and his gaffe. i'm pretty shocked and i with her to get your thoughts on why they're willing to let him go out to the critical swing state of pennsylvania today. isaac: i think ultimately it is

hard to tell the president not to do something. they get that cool air force one jacket and they can tell the plane went to take off. they have their own authority there. that is difficult to sideline a president and pennsylvania where he continues to poll well even with some of the gaffes. this has been an abnormal campaign. there has been nothing about this that is standard or typical. why wouldn't we have these pretty unimaginable gaffes at the homestretch year. lisa: in the next 110 hours of analysis for something we can't foresee, i want to ask the same question i asked rob casey. there seems to be consensus we will have a result the next day or within the next 48 hours. if you look at options and volatility metrics, it is really dying down after the initial first days. do you think the market is overly complacent about the idea

of a contested election or some sort of drawn out process? isaac: i don't. the conventional wisdom is it will take weeks upon weeks to get clarity on this. i have generally faded conventional wisdom. i think when you peel back the onion you can see the number of states have taken steps tax without the processing of ballots. i don't think we will have as many mail-in ballots this time. we are not in the middle of a pandemic. i put those things together and say we will have a very good feel a couple of days after the election. the unknown is the litigation and there's no way to get clarity as to how that will look, whether it is standing or just dismissed outright and does not have impact. lisa: based on the lawyers both camps are bringing into the fold and the types of arguments they have traditionally made, what are the likely legal cases we can see coming out of this? isaac: ultimately, what you have

seen from the trump campaign thus far is signaling they are going to challenge some voter rolls. if it is a tight race that matters more. you can say what about these 1300 votes in dekalb county? if it is a wider margin, those cases don't matter as much. let's keep in mind the trump campaign filed a fair amount of lawsuits after 2020. they were dismissed outright even though that was a close election. i think we will have a good feeling as to who the winner is in just a couple of days after the election. i think we will know on election night who won the senate, which is important from a fiscal perspective. the litigation, i have no way of knowing yet. as long as the margin is wide enough the market will not have to worry too much. annmarie: the financial markets think the senate is going to go read.

how big could it be for the republicans? isaac: if we learned anything in the past five cycles were so, republican senate candidates find a way to underperform when the market thinks they are going to over perform. -- overperform. my base case is you have republicans with 52 seats in the senate. you can make a plausible argument it can get up to 53. there's an outside chance of 54. i don't know if i care that much in terms of the senate controlled. -- control. they apply oversight on the regulatory bodies and a governor on the big fiscal fights in 2025. jonathan: is that the only high conviction you have going into next week? a red senate? isaac: that's it. that is the only one. jonathan: isaac boltansky, it seems to be a view shared by 70 people. the base case -- by so many

people. annmarie: financial markets think a red sweep is more likely than the democratic sweep because of the senate. the democrats are defending so many more seats and they're already losing a seat in virginia. montana comes into play. places like wisconsin and pennsylvania are in play. people six month ago thought they with lean democrat. jonathan: the market has been leaning one way over the past couple of weeks. you get a feeling it has been brought back just a tough. lisa: markets are diverting of it and a couple of polls gave kamala harris a lead over donald trump in some of the swing states. i have to just emphasize what he just said, what isaac boltansky said. we have 110 more hours and people are looking for things to say. to your point, is it avoiding any kind of misspeak that could fill the echo chamber looking for something to chew on?

jonathan: you mean certain people in the white house should not be on the campaign trail? lisa: maisie -- maybe isaac boltansky says he has that appeal, great. on the flipside, lots of people are looking for something to talk about with nothing to talk about. anything will get dissected. annmarie: the one thing that swing state voters agree on and how unfavorable they view biden. it is -45. she needs to differentiate herself from him. why is he going out there? jonathan: lots to talk about this morning. payroll report in one hour and five minute away. up next, ellen zentner of morgan stanley wealth management. ♪

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jonathan: the payrolls report one hour away. the median estimate in our survey, 100 k. that is the lowest since december 2020, one hundred thousand as your estimate going into payrolls. equity futures up by .4% on the s&p and nasdaq 100 with one hour away from payroll, two hours away from the cash open. here is manus cranny. >> the bar was low for pat gelsinger to deliver, and he did. intel up 5.3% this morning.

the most audacious turnaround plan that has been undertaken but they threw everything at it. nearly $19 billion was written down. this really frees up pat gelsinger to deliver on the most audacious rebuilding plan ever. for now, the market is taking the right down as an opportunity to move along. let's move on to apple. dan ives says this was a prove me quarter. iphone sales, $46.2 billion, beat relative to last year, but it is the guidance going into this selling season. the street was looking for 7%. that is a real offer side. china didn't do spectacularly well, $15 billion, lighter than

last year. they keep selling product into china that people don't want. big oil, down 20% from its april period. sherrod brown up this morning -- chevron up this morning. structural cost cuts are in, $3 billion. they are still promising to be one of the bigger buyback players. jonathan: manus cranny, appreciate it. crude is higher by 1.8% on wti. under surveillance this morning, axios reporting that is really intelligence believes iran is preparing another attack. strikes could happen even before tuesday. iran is preparing to use drones and ballistic missiles from their territory. lisa: the white house said they

thought this was the end of the latest tit-for-tat retaliation. iran has other ideas and it is not just axios. cnn reported there could be a response before november 5. that will put the white house in a difficult and precarious position. we spoke to norman rule. he said neither camp wants to see a wider conflict, but if you are iran, you don't want donald trump coming back to the white house. it is being reported more widely that this was too significant of an attack to allow to go unrequited. they want to downplay it, but at the same time, it is clear there were some strategic sites that were affected pretty significantly. jonathan: gold higher by 1.7%. brent higher by 1.9.

elon musk holding of a challenge to his daily lung million dollar giveaway. a pennsylvania state judge says the case is on hold while a federal court decides whether to take the case. the tesla ceo is accused of violating lottery and election law. annmarie: moving to federal potentially. you made a great point, the election is on tuesday. this will not be decided before that. the philadelphia chief prosecutor called this an illegal lottery scheme, and musk was warned about that, but even still, they say 13 people received $1 million checks. jonathan: i hope they spent it. can they call it back? annmarie: i don't think so. don't take my word for it. jonathan: intel forecasting better fourth-quarter revenue. the company working to preserve cash to fund a turnaround.

in the prior quarter, they cut jobs and the stock is up 5% in the premarket. lisa: predicting profit of $.12 per share versus six cents. the key question now is what is the plan for the structure of this company and whether they remain intact? one thing that pat gelsinger said in an interview was he has no interest in selling any pieces. he wants to raise money through share sales and other things but he doesn't want to break it up. annmarie: if they were to go down this path, it would come after the presidential election because they need to know the travel of direction. ed ludlow ask the ceo about washington. he said that intel has not received any of the fund that would help it construct new facilities in arizona and ohio and criticized the speed to which that money is being rolled out. this was the chips and science act.

the ceo thinks that got bipartisan support but the politics in d.c. could potentially impact how this company sees a path forward. jonathan: christopher was on the program and pointed out the divide in tech within chipmakers. intel is down 57%. a brutal time of it in 2024. lisa: has not been able to dominate those sectors, ai going into cloud computing. it is not just a i, but which ai. jonathan: let's turn to the labor market. october payrolls out in one hour. ellen zentner writing the fed will not get a clean read on job counts, incoming wage data shows pressures of eating it support a rate cut at next week's meeting. happy payrolls friday. no points estimates from you anymore but we can talk about the totality of the data.

how resilient is this labor market in october? ellen: pretty resilient. of course we don't get clean data, hurricanes, strikes, seasonal adjustment issues. morgan stanley have 75 k estimate. that is really low, lower than consensus. about it is marred by so many issues. you look at the adp data, strong number. adp is not a forecast of what the bls will report today, it is not meant to be, but it didn't show jobs falling apart and it tends not to pick up weather impacts. that would tell you probably the labor market is not, and other things will impact the data. jonathan: how will the fed process a strong number? how much signal is from strength today? ellen: it tells you even more so the labor market is not slowing.

what investors need to focus on, what i think chair powell will focus on at next week's meeting, yes, the data show the economy is still strong. that's great. we are cutting because we want to hang onto that economy. it is not an argument to not cot. we don't see a real acceleration in inflation. this is not an unemployment rate heading back toward the lows. either of those two would be important and probably would lead the fed to pause but that is not expected. you want to hang onto this economy, and to do that you baby step your way to neutral with the interest rate. that is why they continue to cut despite the data leaving some thinking they could skip in december. lisa: the employment cost index we got yesterday might end up being more important for the thesis the fed is having their the jobs report today. ellen: the employment cost index

shows wages are right where they should be to be consistent with the fed's inflation goal. today we will get some wonky wage data out of the employment report and i would set that aside. natural disasters impact hours worked the most. you can get a hit to hours worked and then increase in hourly earnings, so it looks like there is still some wage pressure. always follow the eci. janet yellen was good about saying that that is all you need to follow for wage pressures. lisa: you are not seeing huge inflation in other areas either. there is this one wrinkle in the situation when we hear from the fed on thursday, and that is what happened two days earlier, the policies that may come on the heels of it. you note that tariffs could pose a bigger risk, more than corporate tax relief. can you talk about how

significantly that could change the narrative for the fed? ellen: when you look at the business surveys, it is tariffs that companies are much more concerned about than what happens with corporate taxes. that is because there is a real uncertainty -- and this has always been the case -- how they flow through to impact the economy, aggregate demand, and inflation. tariffs should be viewed as a one-off price level shift. it raises the inflation number for 12 months until you make that annual lap around the base effect. there is, though, the potential for knock on effects. i go back to the example of washing machines in 2018 when trump slept a severe tariff on washing machines, more than doubling the price overnight. some companies raised the prices of dryers as well.

if you are getting a washer, you need a dryer, too. but if your machine had not broken yet, maybe you just delayed buying one because the price just jumped. we saw a lot of demand destruction for those items during that time. if you are a policymaker, yes, prices increase, but you really should look through that because eventually you will have a drag on aggregate demand which itself will have a gravitational pull on inflation. in the investor community, that is the biggest argument. does this mean that inflation rises so they stop cutting? doesn't mean they need to hike because inflation rises? technically as a policymaker, you should look through that. especially the kinds of tariffs trump has proposed on the campaign trail, let's assume those wishes come to fruition. that is a big hit to aggregate

demand, big draw down on inflation. so the fed should ignore the temporary near-term effects. annmarie: look through that and even cut next year? ellen: where i would place the risk is more frontloaded cuts than a fed stopping. we don't know what will happen after the election. the biggest surprise coming out of the election, that you get a clear winner and everything is fine. that would be the biggest surprise. i would love that outcome for the economy, i would love that for us. annmarie: let's say there is a clear winner, let's say it is trump, the fed is cutting, and then the questions are about what is inflation for next year? how difficult will that be for jay powell to navigate? ellen: he will need to put in his noise canceling ear buds

like i do on flights. if something impacts the economy, then they act. look at 2016, throughout his leadership during trump's presidency, he did a great job of just shutting out the noise and doing the job at hand. you get something that impacts the economy after the election, whatever that might be, the fed is responding to that because it may be damaging to the outlook. that is why i say they are already in a cutting cycle. they operate under the law of inertia, once you get going, you keep going. you talked about a low bar and stepping over it. it is easy to step over that low bar and frontload some cuts of the economy needs support. i would put the risk more to that side than the fed stopping. jonathan: it will be a very noisy news conference anyway.

thanks for catching up with us, ellen zentner of morgan stanley wealth management. s&p up by .4%. with your bloomberg brief, here is dani burger. dani: flooding in eastern spain has killed more than 150 people this week. rescue teams are still searching for dozens still missing. the storm brought a years worth of rain in less than 24 hours, raising questions about whether earlier warnings could have prevented deaths. a jury has cleared abbott and rickett over there baby trial formula. they are facing more than 1000 lawsuits alleging the formulas can cause bowel disease that has been linked to deaths and brain damage. india says google has failed to meet domestic content requirements. it comes after indonesia blocked the sale of iphone sixteens after apple fell short of its investment commitments.

the $1 trillion indonesian economy is seen as a potential growth market with over 350 million active mobile phones in the country. jonathan: more in 30 minutes. up next, preparing for noise. >> we are looking for a drag on payrolls from the hurricane strike or looking at a drag of over 100 k on the payroll. the october and november jobs report will carry that noise. jonathan: we will attempt to separate the signal from that noise just around the corner. from new york, this is bloomberg. ♪

jonathan: equity futures on the s&p up by .4% on the s&p 500.

10-year, 3.2867. under surveillance, preparing for noise. >> we are looking for an drag on payrolls from the hurricanes and strikes, looking at a drag of over 100 k on payrolls. the october and november jobs report will carry that noise. i think you will have to rely also on other economic data. both economic data and anecdotal evidence will be important. in terms of the fed and how they are looking at that job report. jonathan: the october jobs report less than one hour away. including hurricane disruption and striking workers pushing bloomberg to forecast a -10 k and nonfarm payrolls, the first negative print since 2020. robert socgen writing anything size of the above this figure, especially if striking and whether effects are apparent in

the data would reinforce the strength in job growth that we saw in the prior report. good morning. noise versus signal. how much signal would you take from strength this morning? robert: this is a tough one. that is the way i'm thinking about it, if we get a strong report -- given all the affects, in the 150,000 range and above -- you could say the strength that we saw in the prior report was something genuine there is still debate if that was the one off given the softer reports we saw before that. this is challenging because people say certain measures of the report are cleaner than others, but my experience when you have these distortions, they can filter through the entire report. the housing report is self-reported. there is a lot of -- there could be a lot of noise everywhere. jonathan: everyone says now look through it, it is noise. if we get a really weak report,

how do you tell the difference between noise and cyclical weakness? robert: that is a great point. the bloomberg forecast of a negative payrolls print would be eye-catching. i imagine they are betting and even bigger with her effects -- whether effects. it is that which could be expensive. even though i said you could get noise throughout the report, in theory, the unemployment report should be a better measure this time around and payrolls. if people are properly classified themselves, most of them away from work from the weather should be classified as employed but a way for the weather. given the self-reported nature of it, you can still get noise. but it is the genuine weakness that would be hard to parse out because you could have very large secondary effects from this hurricane. lisa: what do you make of the

adp coming in so strong mixed in with the beige book, indicating some weakness. you can make the argument about whether it was good or bad. i just feel like there was a lot of uncertainty, contradictions baked into the data. how do you understand that? robert: when you look at the various flavors in the labor market data, you can kinda pick your own argument based on what you are seeing. adp, pretty strong data. normally not a good signal for private payrolls, may not be capturing these negative effects. typically i don't look at that. but when i look at the confluence of data out there, on balance, this looks to be a labor market where things that moderated but most of the levels are still relatively solid. you are starting to see some signs of turnaround in the soccer data. we saw that in the conference

board labor market differential. overall, it's a very uncertain picture. on balance, i would describe this still as not a labor market falling off the cliff but stabilizing. lisa: it is a labor market that is changing. in the jewel's data, one aspect that i thought was interesting, the one industry that accounted for the greatest number of jobs that fell off was the white collar industry. it seems as if there have been rotations in the employment market, the composition of which jobs are created. what is the nature of which jobs are leading and which are falling off, the rotation in the jobs market? robert: if you think about some of the strains that you have seen on the white collar end, certain industries are being hit harder in this hiking cycle than others. financials, information, manufacturing, which also tends to pay well. there has been a mix of industries that have felt

various strains based on the uniqueness of the cycle. what was exercising the strains on the labor market arm likely to improve going forward. the fed is cutting interest rates, inflation continues to moderate, certain other measures picking up as well. in the background of this, the consumer continues to spend. yes, there has been different strains in different areas, but as the fed cut rates, that should lift a lot of these boats. annmarie: doesn't sound like recession, which is your team's base case, but you think we have a soft landing. robert: rates are still high on a real basis, which is true, still seeing some strains and households, certain small businesses. a race of the labor market are concerning. hiring quit rates have fallen. if you look at this episode

relative to history, there are still strong arguments for a soft landing. typically when the rule is set up, layoffs rise for several quarters and you see the consumer rollover for several quarters. those are two very different things in the cycle. the consumer has continued to spend surprisingly robustly through this period. arguments on both sides, but to me, the data shows a soft landing. jonathan: we have not triggered that feedback loop. your colleague said -- do you as a team believe that ultimately they can run on autopilot, that the data doesn't matter too much? ellen zentner was on the program moments ago saying if anything the fed could frontload some of that to 4%. robert: on the inflation front, what we are seeing is still some

pretty strong disinflationary forces. food and energy inflation are running near pre-pandemic levels. if our commodity team is right and the middle east situation doesn't spill over into physical oil supplies, oil continues to fall. wage growth, we just got a good eci measure that shows inflation continues to fall. there is some risk as the economy remains resilient, but things could come down. with the fed, november and december, especially november, it would be hard to do nothing. to pause after going 50 would look a little silly. after that, december is likely. from there, it will depend on the economy's resilience. it does matter what happens in the election but i don't think the fed will front run what happens in the election. they will see what happens. jonathan: robert socgen, thank

you. a big hour coming up. nadia lovell, michael collins, mohamed el-erian, jeffrey rosenberg. ♪♪ ♪♪ the winter escapes sale is now on. visit sandals.com or call 1-800-sandals.

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>> we are looking for a drag on payrolls from both the payroll gains and strikes. >> important to acknowledge that

the labor market will be noisy. >> difficult to get a clean read on the signal and noise. >> the bottom line is that the labor market is actually pretty healthy. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: the most important hour of the week, 30 minutes away from payrolls. equity futures on the s&p 500 up by 0.4%. close to 0.5 on the nasdaq 100. 2's and 10's up another 50 basis points. in our survey, the median estimate inching lower throughout the week. now 100 k. lisa: people looking at the unemployment rate which is likely to be 4.1%, in-line with

the prior month. that could be more telling in terms of a cleaner read across the labor market. you raise the right question, jon, which is essentially what will be the market's response to either? annmarie: especially after adp, the market is thinking there could be an upside surprise. but if it is negative, can you read through all of that negativity? goldman sachs says it could only really be helene that could shave off 50,000. milton is not really affecting things right now. everyone come to the conclusion that boeing will be around 40 k. jonathan: we have one major event risk on the calendar over the next week. coming up, nadia lovell of ubs. we will catch up with michael collins from pugin fixed income ahead of a crucial window of financial markets worldwide.

and we will speak to mohamed el-erian reacting to what could be a very messy payrolls print. 30 minutes away from the first event of a very busy stretch. u.s. payrolls on stretch, u.s. election, and fed decision on thursday. nadia lovell writing, we expect the fed to cut by 25 basis points next week but sentiment is likely to remain on guard until the presidential election uncertainty fades. good to see you. how long before that federal reserve decision, do we look at the electorate, how long before we get an outcome from november 5? nadia: we think you will have a sense of who the winner is for the presidential election the day after. the makeup of congress will take a little bit longer just because the races in various battleground states is quite tight. we would expect that by the time you get to the weekend, we will

know the composition of congress as well. jonathan: we hope that you are right. three pillars to your view. first of all, corporate fundamentals, earnings. so good so far? nadia: so good so far. it is not as great as the third quarter, double-digit earnings growth. now we are trending too mid to high single digit earnings growth, but earnings are beating expectations. right in line with our expectation of several percent eps growth. when you look at what companies have been saying, incrementally positive. you heard from the banks several weeks ago as well as some of the car companies, suggesting the consumer remains in good shape. the industrial parts of the s&p 500 are still quite mixed. we hope to see a rebound in ism manufacturing. that is where you are seeing some of the weakness right now. lisa: you are also seeing

sensitivity to real valuation. earnings really hinge on how the company has done in the stock market in the months leading up to it. how much does that raise the specter that valuation is coming more into play for those that are feeling nervous? nadia: absolutely expectations were high coming into earnings particularly for tech. rebounding off of the october low, looking for some cyclical uptick in terms of the earnings growth. we think that remains a potential cap on the market. if we cannot get that re-acceleration consistently across the 493, upward revisions in tech, you could see the market not react as positively going forward. lisa: what i think of valuation, on a relative basis, suddenly bond yields start to matter more. priya misra was on earlier, and she says if you start to see

10-year yield's breach 4.50, risk assets will start to wake up more and pay attention. is that in your risk case? nadia: that's a possibility. we think the 10-year will come back down but it is a near-term risk. why is it moving out is a real question. part of it could be the trump trade, but part of it could be that we just have better economic growth continuing to the upside. if it is because of that, the market can work through that. those heirs of the market that are more interest-rate sensitive, small-cap, for example, could face some headwind, but other parts of the market, particularly tech, can work through that. annmarie: back to the election, what gives you the conviction that we will know quickly? nadia: you saw that in the last election, the financial markets start to make an assumption. you may not get a call on the election. we didn't get one until several

days later, but the market will begin to suss it out depending on how the ballots are coming in, especially in the key swing states, to put some chips on the table about where the outcome could be. annmarie: i am struck because arizona is talking about 10 to 13 days. if it comes down to that state, maybe this is a market attractive price in what that policy could look like out of washington. you have two likely scenarios, what are they? nadia: i want to preface, we think it is too close to call, but the likely scenarios is we think harris with a divided government and then trump with a republican sweep. that would yield different outcomes in the market. harris with a divided congress, more status quo. we could see a bit of a relief rally, renewable names under pressure. and then trump with a sweep, we

think it is slightly positive, but honestly it is a tough call. you have competing policies here. not only the possibility of lower corporate tax rates, easier regulation, and then tariffs. jonathan: you think it could shape sector level performance. people say it doesn't matter, previous cycles, stocks go up. nadia: we disagree. it does matter at the sector level. during the last trade war, consumers came under pressure. if you have supply chain surprise, you are facing incremental cost. the decision has to be made, do you absorb those costs or do you pass that on to the consumer? parts of consumer discretionary and even tech could be under pressure from higher tariffs. jonathan: earlier we talked about a procyclical tilt in equities. would you suggest that at this

point it has been more about the underlying fundamentals, the earnings we have seen, economic data than maybe about the politics and next week? nadia: it is a combination. i would lean more into fundamentals. capital markets seem to be recovering, and we have a curve that will stephen. -- steepen. that could alleviate costs on deposits going forward. we have been saying to our clients, it is more about the prophets than politics right now. lisa: we are 20 minutes away from this jobs report. as you listen to the commentary from corporate executives, how much do you see a desire to hire but a waiting period to understand what the framework will look like? nadia: great question. what we have heard in the second and third quarter earnings season, some companies have been delaying cap acts as well as

hiring in tengion due to the political uncertainty. we will see with the print is at 8:30. i agree that the risk is to the upside. if we get about 200, the market may not like that because there will be repressing in the market. lisa: how we reach the point where good news is bad news in risk assets because of that rate overlay? nadia: absolutely we think there is some truth to that. right now the market is pricing in 40 basis points of cuts for the rest of the year. we think that is fair. we are looking for 50. the 80% probability of a cut in december it is reasonable but could be taken off the table if we see a strong payroll. jonathan: good to see you as always, nadia lovell of ubs. the first of three big events over the weekend. next week on tuesday, election in america, and then i federal reserve decision.

with your bloomberg brief, here is dani burger. dani: oil prices rising after a report that iran is weighing a possible attack on israel in the coming days. axios reporting that iran is preparing to strike with drones and ballistic missiles. analysts at the time warrant that the market had relaxed too quickly. the latest data out of china indicates the economy has stabilized after the stimulus push. measures of factory activity exceeded expectations. the purchasing managers index unexpected we rose last week. home sales saw their first rise of the year. general atlantic is leading a $500 million funding round for tech startup insider. they plan to use the funds to

expand their business in the u.s., explore potential acquisitions. the company was founded in istanbul in 2012 and now has major brands like samsung and walt disney. jonathan: thank you. next on the program, morning calls, and we will catch up with michael collins from pugin fixed income. payroll numbers around the corner. from new york, this is bloomberg. ♪

jonathan: live from new york city, welcome to the program. equity futures going into all of that positive 5.4% on the s&p 500 -- zero point 4% on the s&p

500. let's get some morning calls with big tech in focus. baird raising their target on intel. that stock is higher in the premarket by nearly 7%. jp morgan raising its price target on amazon to 250. that stock is higher by 7.3%. barclays lowering its price target on apple to 184, citing week revenue growth expectations. -1.7. turning to the bond market with payrolls around the corner, treasuries posting their worst monthly law since 2022 ahead of three key events over the next week. michael collins from pugin fixed income joins us now. major move in the bond market. i went back to some note that you put out before you joined us last going into the last payroll report and use of the biggest

risk was skewed toward higher rates on an upside surprise. that was 50 basis points ago the two-year and 10-year. what is the risk balance going into this one? michael: i don't think i expected that big of an upside surprise. the bond market has been acting with tremendous volatility, almost schizophrenic-like. six months ago you think about what was priced and in terms of the long term funds rate, 4.25. that it went down to 2.75 a month or so ago, and now it is 3.5. those are giant moves on basically wiggles in the data. because of the uncertainty in the data, hurricanes, you need a really big surprise on the upside, about 200, or on the downside, below zero, to move the markets. the markets will discount anything in that zero to 200

range. i think the tendency is that markets have sold off a lot. my bias is we are oversold here on the rates side. three and five eighths permanent funds rate for the rest of our lives is probably 75, 100 basis points to high. jonathan: so you would buy bonds into next week? michael: i think this is a buying opportunity. we have been talking about 4% to 4.5% on the 10-year as being the i zone. i think the 10-year will probably spend more time between 3.5 and 4 over the next 5, 10 years. there is a big permanence of higher growth, higher inflation, maybe more debt issuance, and a higher funds rate priced into the markets. that doesn't make sense to me. in the next 12 months, that

could be right, but in the next five years -- and that is how long-term bond investors should think. that three and 5/8 funds rate is too high, too much positivity priced in. the markets have priced in that no landing scenario where you have taken out any probability of a recession or downturn indefinitely. lisa: some would argue that there is a premium of baked in here that really reflects the deficit and how much debt in the u.s. will issue especially if you get certain tariffs implemented and that causes inflation to go up. questions about what kind of ability the u.s. will have to finance those deficits. do you just reject those arguments out right, they have not proven to be true so they will not be? michael: it is the debt service. that gets paid every day.

the amount of interest expense that the treasury is spending relative to the overall budget or relative to the revenues or gdp is going up and up. the higher that fund rate stays, the more pressure it puts on the treasury, which means they have to allocate more of their financial resources to servicing interests, paying for investors, wealthy investors interest, which really hurt the economy in the long term. this is what we think about as long-term investors. how does this play out? it is back to the fed. ultimately the funds rate has to be lower. the fed ostensibly will be bailing out the treasury but they will be basically supporting the economy by cutting rates. the sustainability of this interest rate will be untenable. lisa: how much are you going into treasury but also going into credit, riskier securities, simply because you see any type

of response to come from the fed as an offset to that incredible deficit, not necessarily to counter it or inflation? michael: credit has done great, valuations are stretched. from the corporate market to the high-yield market to the real estate markets, we are really grasping onto the idea that rates will be a lot lower, a couple hundred basis points in a year. now that we have taken a hundred basis points off of that, that will have an impact on consumer fundamentals, corporate fundamentals. i think there is more pain to come. our message had been cleared to clients, add duration at these levels and reduce credit risk. that is the trade we are putting on. i think that is really the direction of travel, that is where the value is come in the treasury market. if you look at the

supply premium, that number is over 80 basis points. that is a gigantic credit or liquidity or supply spread that the treasury pays every time they issue a 30-year coupon at an auction. that used to be a negative number. treasury spreads have widened 150 basis points the last few decades. nobody talks about that. that is where the value is in the treasury side, more so than the credit side. jonathan: speaking of water spreads, germany versus the u.s. and that october close to 200 basis points. given everything you have said, do you think that spread is too wide, as well? michael: maybe the right number is between 100 and who hundred, maybe that is a little bit too high, but they are expected to grow probably 100 basis points if not more. germany has had zero gdp growth

really since pre-covid. it has been one of the worst performing countries in europe. we have averaged 2.5 or even higher right now. that argues for a 200 basis point premium. maybe not unrealistic. jonathan: 190 now. michael collins, good to see you. we caught up with black rock earlier this week, talking about the divergence they are expecting on the growth side and the united states. lisa: the reason why a priya misra likes the debt markets because you see that kind of deceleration. but here is the issue. over the past week in particular, we saw a german yields skyrocket, yields in australia skyrocket, even though they have some negative numbers. is this a matter of them having any autonomy over their market, or are they completely pegged to what happens to the u.s. treasury markets? jonathan: gilt yields have also

done that but that is a very u.k. story. payrolls in about eight minutes time, the median estimate is 100 k. michael mckee, we have been talking about the noise we can expect all week. how much noise will there be? michael: when you look at the hurricanes, it is either side. helene was in september, still a lot of people out of work, but not the immediate reaction. milton was halfway through the survey period, almost at the end. if people were on payrolls for one hour that week, they are being counted as employed. it may not be as bad as people think but we just don't know. jonathan: do you think there is a real risk for a much stronger number? michael: stronger than the market is betting on at this point. i think people are hedging. the whisper number is 136. wall street is leaning toward more strength.

if we get closer to 180, you will have everyone going back to this u.s. economy is really strong question. the boeing thing is important. if the union accepts the contract, goes back to work, they start turning out airplanes again and the economy gets stronger in the fourth quarter. jonathan: where does the strength come from? where does 200 50 k in jobless claims come from? michael: we are spending money, consumers are spending, companies are still hiring. the sectors change. i am sure people will see who are doing hurricane relief construction, things like that, but at this point, it is just an overall good economy. we are kind of running in a virtuous circle. lisa: given the factors will be a messy number, given that it is a messy moment for the fed, on thursday, how much more will they be looking at the eci

number compared to other inflation measures coming in as justification to keep their cutting cycle? michael: the cutting cycle will be dependent on whether or not the economy is strong enough that they think it will produce inflation. with the strong numbers we have had, eci is showing there is not an inflation problem, so they will feel they can keep going. lisa: how closely are you watching revisions? michael: we are watching them a lot. last month, they were very strong, the number of revisions. i think the real key is that people will be looking at what the october numbers were because we are trying to figure out what is going on, ahead in this case, to figure out what is going on from here. jonathan: coming up, we will catch up with mohamed el-erian. we will speak with jeffrey rosenberg from blackrock. in our survey at bloomberg, the median estimate is 100 k. the high and is 180 k, the low

is -10 k. based on the disruptions, this should be a weak print. this could be anything. it feels totally random this morning. the random number generator drops in about four minutes time. equities up by .4% on the s&p 500. bond yields higher after advancing 50 basis points across the curve through october. the 10-year up two basis points. the two-euro up through 4.20. the number drops next. ♪

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jonathan: the october payrolls report, seconds away. the scores look like this. equity futures on the s&p 500 firm or by .4%. on the nasdaq, up by .4%. on the russell, up by .2%. your 2-year yield, 4.20. 10 up two. your estimate is 100,000 in our survey of bloomberg. with the numbers, here is michael mckee. mike: the random number generator comes very close to bloomberg economics. 12,000 jobs created.

last month revised down to 223,000. the unemployment rate, no change. the change in manufacturing payrolls -- and i assume this has a lot to do with the low overall total -- negative 46%. change in payrolls, egg of 28,000. it looks like we have had some hurricane impact here. i'm looking at what the bls is saying about that. they worked during the reference period, so the survey collection right, they say, is well below average. and at this point it does not say -- i do not see a number in terms of what they think, that they say this has all been affected by the hurricanes. so, it could be revised significantly next month when more data come in. rest of the numbers, average hourly earnings up .4%. that was a surprise.

the expectation was for a .3% gain. average weekly hours, 44.3, which is a bit of a surprise. if you are not going to be working because of the hurricane average hourly -- average hours go up. they were forced participation rate is down a take from last month, and that probably has something to do with the hurricanes. a lot of the people who were out of work were lower-paid employees in the service industries. jonathan: we have a lot to work through. the estimate at the high was 180,000. the number is 12,000. it is a big downside surprise. let's see how yields are reacting to this. on a two year we were at 4.20 going into the number. we are down about five on the session now. on the 10 year we pulled back by two basis points after breaching 4.30 briefly. in the equity market on the s&p 500 just a sneak peek at equities. still near session highs, up by

.5%. on the back of this with the lower yields you push that through four -- foreign-exchange, a stronger euro. i want to compare and contrast two things. headline payrolls and unemployment. unemployment at 4.1%, steady. payrolls, dramatic downside surprise. tell me about the survey that produces the unemployment rate and the kind of question that would be asked that would generate a steady staple 4.1%, and maybe that is the cleaner read this morning? mike: basically it is, are you employed? whereas you have to spend an hour at work for the establishment survey if you have a job. then you are counted as employed. now, employment in the household survey went down by 368,000. unemployment only one up by 150,000, but there was a 220,000 drop in people in the labor

force. so a lot of people probably -- to a certain extent a could be people who saw their business wash away. they don't know if they have jobs. so, at this point when you put it all together you get 4.1 percent, but it is two different ways of looking at it. jonathan: the challenge this morning is to draw a distinction between cyclical week is an one-off noise. how easy or difficult is that to do this morning? mike: i think it is reasonably easy to look at this and say there is a huge hurricane effect. but we don't know exactly what it is because the response rate was very low to this survey. companies did not respond because maybe they were a little bit busy. during the time cleaning up. but when you look at manufacturing jobs were down 46,000, construction jobs only up 8000, and there is usually a rebound in construction jobs after natural disaster as people rebuild. that probably has not been captured yet in numbers.

retail trade down 6000. trade and transport down one thousand. professional business services down 47,000. and temporary health down 49,000. that is an area you want to check into because we do not know whether that is because the economy is slowing, which is usually a sign when you see those numbers go down, or because they were caught up in the hurricane as well. 40,000 jobs in government, which is largely state and local probably a seasonal effect from education because there were only 1000 jobs added in the federal government. leisure and hospitality, that is going to be a hurricane-related thing as well. lisa: two numbers stand out. 4.1% for the employment rate and the revision down to two junta 23,000. it seems to me like this could be a report that many people in the market could come out and say it is really messy and we are going to have to parse through the mass but it is pretty much in line.

is that kind of the way you would view this? mike: yeah. this does not change the fed's mind about what it is going to do it all. when you see the unemployment rate and gain in wages, the wage number may be distorted by the hurricane, but it is still in line with what we have been seeing. it is not a major boost to inflation danger. and then you mentioned the eci before the numbers came out. inflation seems to be under control on the wage side. they will look at the jobs number and say we are going to have to wait until next month until we get the revisions and see how may people are on payrolls. we will find out, which is interesting, because you look at the adp number which is very strong for private sector jobs compared to a negative number for non-farm employment on the private side of -28,000, adp is looking at what is in their computers to pay people. whereas the establishment

survey, people have to send in the information. jonathan: i called it a random number generator going into it. the number this morning, 12,000. range of estimates was really wide. the median estimate in our survey was 100,000. in response to this data your market looks like this. fixed income two-year, 10 year and 30 year. as you might expect off the back of a downside surprise like the one we got yields are lower by eight basis points. only six minutes ago the 2-year was at 420 and the 10 year was at 430. we are now down four basis points. looking at equities, equity futures still elevated. up .5% on the s&p. on the nasdaq, up by .6%. jeff rosenberg joins us now at blackrock. how useless is this number this morning? jeff: well, it is a good question, jonathan.

a lot of noise in this number between the revisions, the strike impact, the hurricane, the bls not coming out with much clarity on that. i think the market reaction is to the headline, disappointment. we were under-pricing november. i think that makes sense. the discussion on the wages and focusing on eci is probably the bigger story, focusing on the unemployment rate. a more important readthrough for the fed. i don't think this is going to significantly change the near term trajectory. one partly it was the longer term trajectory has been repriced dramatically and out of think anything we see in today's data is going to reprice that into 2025 pace of the fed expectations, given the noise in today's data. jonathan: let's bring in mohamed el-erian. we would love your early reaction to this. is this noise? is this weakness we can look through? mohamed: my three takeaways -- and the first one speaks to, is it noise -- three elements are

noise we should look through them. payrolls, labor force participation, and earnings. the fourth one, unemployment, i agree with jeff. that has more information content. two is, if you want to make more of this data then go beyond the big four headline numbers i'm going into the details. and you need to do that if you are going to derive any economic and policy and locations from this report. finally, the reaction of the bond market has to do with two things. one, as mike noted, the whisper number was even higher than the consensus 100,000. as you noted earlier the balance of risk was on the upside for the market. what you are seeing is a repositioning that people were hedging a little bit because one thing that would have really moved things is a much stronger number, not a much weaker number. that is something you noted earlier today. lisa: i'm struck by the fact

that we have gotten so many revisions and so many unclear numbers that we cannot fully rely on. how much are you really taking more signals still from what corporate executives say and the beige book and some of that commentary and some of the numbers we have been getting out that show, that have led this expectation in markets that there should have been an upside surprise? mohamed: this is a time when you have got to take a very holistic view, and also have potential salt added to all of that. because we have some major events coming up. look, on the whole i think the data are consistent with an economy that is still robust. and inflation rate that is proving more sticky than you would like. and a major call for the fed to exit this notion of fine-tuning and go into a world where it has a steady steer on interest rates. it should be cutting by 25 basis

points for the next few meetings, and then revisiting after that. it should not be looking to react like it has in july by not cutting, like it did last time by cutting 50. it should just be steady because this data is going to be noisy, and that is what happens at inflection points. lisa: to that point, and a number different people have come on the show today, in the past few weeks, have pointed to this idea that the fed could front road -- front load rate cuts because they are on this steady steer right now. that they do have room to make rates less restrictive. based on these numbers is that basically your base case too? that they are going to take this window to front load? jeff: if you look at where the market has been moving in has not been in the november and december expectations. the fed has done a pretty good job saying we are going to front load. there is a debate about whether

50 was a mistake or not. let's put that to the side. it is really about the ford-looking 2026 path. that has been repriced. the story going into next year will be the fed talking about, we have gotten started here in terms of normalization. we don't have to go quite as fast because away from today's data, the economic data, yesterday's data is much stronger than the fears over a very restrictive fed policy would otherwise say. they can kind of pull back. everyday talk about every other meeting. that is kind of in the price, so i think the fed has got itself in a better place. we are going to get the frontloaded cuts. 50 last time, 25, 20 five, and then we will see where the data goes and where the debate on how restrictive are we? the economic data has held up well. this is a downside disappointment, but the labor markets have been normalizing.

they are not collapsing. they are normalizing. they are still trying to stick the soft landing and i think the soft landing is still the message. jonathan: 12 minutes ago we got a big downside surprise on a payrolls report. the median estimate was 100. i want to remind you of some words from a speech from governor waller in the middle of october. governor wallace said this. this report will show a significant but temporary loss of jobs from two recent hurricanes and a strike at boeing. these factors may reduce employment growth by more than 100,000 this month. he went on to say, since the jobs report will come doing the usual blackout period policymakers you will not have any of us trying to put this low reading into perspective, though i hope others well. let's do that now. mike mckee, do you have some more? mike: looking again at the hurricane impact, the establishment survey was affected for two reasons, they say. one is that the hurricanes probably prevented people from

answering, and also the survey period, the way they phrase it is it ended several days before the end of the month because of the timing of the month. they may not have gotten all the surveys in that even were answered, so we're going to have to look at next month to do it. as lisa points out, as the survey response rate is the lowest since 1991. when you look at what the weather is overall, it is understandable. now, the other part of it is the household survey and bls specifically says that was not affected by the storms. so, the number you can trust is the 4.1. the number you got to hold in abeyance is the 12,000. jonathan: do you think this makes the fed's life easier next week? would a stronger number have been worse? mike: a stronger number would have been something they would have had to talk around. now they say, we seem to be on the same path and unemployment

does not seem to be going up and average hourly earnings have not changed, so we don't have a problem, we can cut. jonathan: bond yields are down by nine basis points on a two-year. just moments ago we saw 4:30 -- 4.30 on tans. mohammed, you wrote this week the importance of understanding what is behind this move. we have heard a bunch of people give a bunch of reasons as to what is behind it. it might be the data. it might be deficit concerns. have you decided on which one it is at the moment? what you think the dominant factor is owing into next week? mohamed: i have not. i don't think you can. there are at least four influences, and it is very difficult to determine the weight of each. over the next few days we are going to have some major developments. we are going to have the fed recalibrating again.

were going to have the results, or at least we will know how to vote -- how the vote went for the elections. so, we are going to get some important data points. i'm really glad you read our chris wallace speech, because he has emerged as the best fed policymaker in terms of not only assessing what has happened, but telling us what to look at. and i thought what you read out was interesting. of course when they get a newspaper leak during the blackout period, i think the fed right now is looking at this, and i agree with what was said. they will say, this is not going to influence what we are going to do and we are going to cut by 25 basis points next week. lisa: they may not need a particular person to leak anything to the market to correct the impression. jeff, what do you think? in terms of the main drivers of the yield rise we have seen over the past month? the increase across the curve? jeff: yeah, i will agree.

there is a lot of crosscurrents in there, but i would say a big one, not to ignore, and it is hard because we are obviously very focused on the prospects of post-election fiscal policy, is that the economic data got much better. and you had a very negative, very extreme level of fed expectations priced into the bond market. so it is a little bit of a combination of the bond market getting over its skis in terms of consecutive 50's and accelerating the expectations into pricing on the weakness, and then when you start to pull some of that weakness back in terms of the economic data that started to come in then you had a reaction. i think that is probably the main thrust. there is a lot of other stuff, as mohammed is talking about. jonathan, absolutely i think this makes their life easier. it would have been harder if there's was an upside surprise.

certainly the number is overstated in terms of its weakness. i think everyone knows that. it makes it easier for them to deliver on the 25 cut, which they certainly want to do. i think that is an important point to highlight. annmarie: there is also revisions to the downside for the prior month. is there a possibility that 50 is back on the table. jeff: i would say for november that is a pretty high bar. the revisions are part of the noise, and i think the signal is the household survey, the 4.1%. the eci number, the gdp numbers, they have their own revision problems, but overall you have ak-shaped recovery, but in aggregate, despite the distribution of differences, the aggregate is doing very well, and i think that is driven by the ease in financial conditions, the support for consumption, what we saw in terms of the revisions and gdi

and savings rate. the consumption side is still in aggregate supported here. that, more than the noise out of the payroll reports and the difficulty in measuring that on a month-to-month basis, is going to drive the outlook for fed policy. annmarie: when the fed meets next week this may actually help them and make their job easier. what might make their job very difficult is presidential election. already we are seeing this number being politicized. trump camp is calling it brutal. what does the harris camp need to come out and explain about this jobs report to an electorate that says the economy is the number one concern? mohamed: they need to explain that the numbers have been heavily influenced by one-off effects. painful one-off effects, especially with respect to their hurricanes. and also by the strikes. and they need to do that because

they have not taken sufficient control of the narrative. we talked day after day of economic exceptionalism. that is not what the narrative is out there. the narrative is about the cost of living, about inflation. people don't realize that this economy has been out-performing not just expectations, but has been performing the rest of the world. and this is really important. as to the fed, look it comes down to two numbers. one mentioned by jeff, eci. the increase, the quarterly increase in employment cost. you look at that and you are relaxed. the other number is the pce inflation. you look at that, you are not so relaxed. they are going to have to balance that. i think if you balance that you end up with a 25 basis point cut, you certainly do not go to 50. jonathan: november feels like an easy decision for them if they don't have a result of the election, if you get the jitters

in markets it is another reason to cut by 25 basis points. december is where things get hard. a question we have come back to a few times, we have had this suggestion with you too. whether you really believe next week's election has the potential to redefine the economic backdrop not just in america, but worldwide. and whether by the time we get to december the federal reserve will have to think about the policy initiative is on the table, even if they are not yet reality in washington, d.c. mohamed: i have been bemused by how confident some people have been in predicting what will happen here, what will happen there. you're trying to solve, think of it as a three by four plus two matrix. think about it. there are four potential outcomes in congress. there are two potential outcomes for who wins the presidential election. and the third one, which is,

what? and then even a few solve for congress and the president you have to solve for a third issue, which is, how much of what is being said will be implement it? i remember what happened in 2016. i remember how the market turned on a dime when the winning candidate at that time came out with a completely different narrative than what was said in the election campaign. so, the fed on wednesday morning is not going to be able to solve for this four by three matrix. they will say, we will put this aside, we will react based on what we know, and then revisit this issue. jonathan: that is what it feels like. it feels like we are on autopilot to the high estimate of neutral, which could be around four. so you get a few more cuts and the decision gets harder, because i think for many people we are not -- we are truly flying blind based on the outcome of next week.

i would love your view on whether you agree with that. jeff: i think the key observation is, we have gotten a little bit closer in terms of a more reasonable expectation of the level of fed cuts relative to the debate or the distribution around, where is neutral? a month ago you were very much weighted to one side of that debate, which was, we are far away from neutral, we have to cut quite a bit. and what is the day of that sort of pushes against that? the very low level of neutral? economic growth, right? you don't know where neutral is, so you know it when you see it. and where you see it is in the data. the piece that has been missing here for a while is, or is the slowdown? yes, the payroll, yes the labor markets are slowing, but they are not tightening and they are certainly not eroding to the level of degree that would scream we need to cut 50 basis points at each meeting because this economy is hard landing.

so, it really comes back to this kind of basic fundamental, which is, you see it in the economic growth data. there is lots of inputs to that. we can look at earnings, we can look at layoffs. you can look at the leading indicators for the job market and not much in their screams that this is excessively tight. the only thing that screams you are excessively tight is a historical comparison of the real rate relative to past real rates. outside of that the economic data says, financial conditions are how monetary policy transmits. it is much easier than the real rate would imply, and so you don't need to cut as aggressive. and that is kind of recognized in the bond market, so there is less disagreement, so therefore less potential volatility from realizing that this agreement. jonathan: how would you navigate next week? mohamed: i would wait, and mentally i would change the

paradigm. for a very long time we looked at the stage, the economic and policy stage, and we looked at the fed as the principal actor. going forward we should think of the fed as a stepping back and there will be three of the principal actors. one is fiscal policy. the second is tariffs. and the third is a combination of reforms, deregulation, and industrial policy. so mentally we are going to have to evolve. it is really hard because we have been conditioned to look at the fed as the only game in town, but we are coming into a world, as jeff said, where the fed is going to be going to the side and allowing other actors to determine where this economy is going. and we just need to change our mindset to make sure we allow for them to enter our mind and assess them better. and going to be hard.

jonathan: i'm going to be kind to you both. i'm not going to ask for election guesses. mohamed el-erian alongside jeff rosenberg of blackrock. if you are just joining us you missed the fireworks. big downside surprise on the jobs report. we were looking for a huge hurricane disruption. some weakness in noise a lot of you assume we can look through and the federal reserve can lichter as well. between now and then we've got a big election coming up, so as we count you down to the bell here is the trading diary through next week. on monday a sprinkle of economic data, durable goods. on tuesday the presidential election. there's day, a decision from the federal reserve. plus a rate decision from the boe. on friday i've got no idea if we will still be awake by the time we get to friday morning. consumer sentiment. mike mckee, thank you, sir. coming up on monday, stephanie roth, mike wilson of morgan

stanley, and the ryanair ceo michael o'leary. of wonderful weekend. thanks for choosing bloomberg tv. this was "bloomberg surveillance." ♪

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katie: futures higher after a big mess on that payrolls report. 30 minutes until the cash trade starts. i'm katie greifeld. sonali: i'm sonali basak. matt miller is off today and bloomberg "open interest" starts right now. katie: coming up, that jobs report shows a massive hit from storms and strikes. next up, u.s. election and a fed decision. we will get the view from the white house and pimco.