>> we have a robust labor market that is a key fundamental pillar to the u.s. strength and outperformance. >> we have been saying the labor markets holding up pretty well. >> hard to argue that the labor market is re-tightening. >> the u.s. is doing better than the rest of the world. >> we are seeing some signs of loosening in the labor market. announcer: this is "bloomberg surveillance." jonathan: let's get you to the weekend. good morning. for our audience worldwide, "bloomberg surveillance" starts right now. a three-day winning streak on the s&p 500. equity futures totally unchanged on the s&p. on the nasdaq 100, negative not

even 0.1 percent. the jobs report, the estimate, 140. lisa: what is the potential risk to markets. downside surprise or upside surprise? if it was 260,000 on a headline print, it was not because a wild freak out and reacceleration of the labor market. you might get discussion about how random this number is, the upside surprise that always happens in january but this is a market that has moved beyond the overheating narrative to concern about potential cracks in the labor market. jonathan: we are taking some heat out of the story. jobless claims just a little bit softer. we saw that in job openings and the ism as well. lori logan of the dallas fed in no rush to do anything. what if inflation comes in close to 2% in the coming months? that would be good news. it would not allow the fomc to cut rates soon. lisa: she is talking about the

neutral rate being around where we are currently. she is on the hawkish side. what is interesting to me is how little this moved the market. one hawkish member is trying to put out this possibility. they will move according to the data and they are not getting forward guidance. people are looking for cracks now. they are looking for downside surprise. it is no longer the fed. it is the 10 year yield. jonathan: 40 basis point move off the highs of last month. we are also waiting for policy changes. the president's tax plan, end taxes on tips and overtime. extend t cja back from 2017. -- got it. then they threw in this yesterday. end the carried interest loophole. it did not see that coming. lisa: did not see that coming as well as an embrace for new team owners. these are two new provisions. all i would say for this for both of you, if this republican majority passes closing, i will

buy dinner for everyone. i do not see this happening but he is coming out with an even more ambitious tax plan. lisa: what is shocking to me is he is surrounded by people from wall street, from the private debt industry and this would target them. this basically says you can no longer pay the lower tax and treat your carried interest as long-term gains. all of those private equity managers, this is something that one estimate has potentially raising $12 billion over 10 years for the irs. it sounds great. i do not see the support for it. jonathan: that is a man who is not running again. there are plenty of people in congress who are not running again. i would not be surprised by anything at this point. we had an opportunity to do that. kristen sinema. i would not be surprised by anything. annmarie: the democrats ran on that. they said we want to be able to make sure we are taxing

billionaires and the wall street elite with special tax breaks. when the push came to shove in the 11th hour because of kristen sinema, they were not able to do it. they had control of the house, the senate and the executive branch. trump has the same level of control. people say do not even ask me about this. it is not happening. you are right. maybe anything is possible. he is not running but do you know who might be? jd vance. jonathan: equity futures just about unchanged. coming up, the payrolls report. kim wallace on trump's tax priorities. and shweta khajuria on amazon's outlook. we await u.s. payrolls at 8:30 eastern. looking to the bond market, "we take comfort in 10 year yields decisively breaking below four .50%. this is the debate of the day. do lower yields support cyclicality or suggest growth is slowing."

chris is joining us. does the equity help answer that question? chris: we can get an idea of how the market feels. that is the big question as we settle in past the initial tariff announcement, the debate we are having in every meeting, is it something that will re-stoke inflation down? the line? if it is the latter, i would not expect to see oil on the lows. i would not expect to see energy stops continuing. i do not lean to the inflation camp. i lean more toward the growth camp. we are ok at the moment. credit is to locate. i want to be vigilant on the growth side. if we are sitting here in a few weeks and 10 year yields are back under 405, you begin to wonder what is the market trying to message to us about where growth goes from here. jonathan: does the conversation change as we talk about taxes?

start with trade, start to shift back to taxes. chris: during trump 1.0 the debate around what would ultimately become the tax cuts, that was when cyclicality and growth were at their most pronounced. it was when the tax cuts passed when cyclicality began to roll over. you got this divergence between bond yields going up but cyclicals were underperforming. that is not the conversation -- combination you want to see. i want to be on guard for that. lisa: given that there has been this rally does that give you confidence that this shift into that equal weight trade away from big tech is sustainable? chris: number one, we were sitting here a month ago on a payroll friday with yields at 4.75 and we had a relatively odd number and now yields are under 4.50. a lot was priced in at 4.70

five. i would be surprised if he got back above there. i think ultimately tens will settle in the 4.15 neighborhood. what does that mean in terms of the market's tone and messaging? two things we need to watch. financials will be credit. it is so consistent for the last 18 months. credit conditions have been remarkably benign. something is changing. that is ground zero where we have to spend our attention. lisa: it seems like people are preparing for a potential growth shock. this is a point that priya misra made. how asymmetric is this market positioned interns -- in terms of a downside surprise being a driver of market activity than an upside surprise? chris: it was only three or four weeks ago where people were worried about bond yields going up to 5.15, 5.25.

how quickly the plot changes in this game. the last two years 10 year yields have averaged 4.15. we are near that average. that is probably better for equities than not. you start to get the long end under 4%. then you wonder why, what is the messaging on the growth. with respect to big tech and the big stoxx, i do not think it is yields. i think dollar-yen is the big story. think about the last 10 to 12 years. all of this money that has moved into the top of the market, mega cap stocks. it has been coincident with this yen carry. what changed in july? when did the s&p peak? also, july 10. these two are tight at the hip. where is the young this morning? something has changed here. all of the pairs have rolled

over. this is the big story. does the east to west flow become less pronounced when dollar-yen is off the playing field? jonathan: four weeks of yen strength. also europe, this corresponding pickup in european equities. year-to-date, it is not even mid february. is the european equity story part of that call as well? chris: a few weeks ago i was watching your program and christine lagarde was in davos. she was using the phrase that she was pessimistic on europe. wait a second. you have a pessimistic central banker. the euro industrials are making a new high. i want to be a buyer of pessimistic central bankers when the market tells me i should. i like europe. in the very near term, it has been a remarkable start to the year. as long as these banks are involved, -- all of these luxury

names, everyone is so tied to china. should we entertain the idea that may be the economy has found a trough? i think so. annmarie: do you entertain this idea if donald trump puts tariffs on european products? chris: i embrace the idea that i don't know. the first rule of our work we know that we don't know. i value the market's opinion over my own. certainly the market knows the possibility of all of all these things. yet europe carries the flag of leadership to start the year. there is messaging in that. we have had a reset in euro euro is the -- euro usd. we have had a reset in european short rates. that sounds more constructive for the equities than not. annmarie: do you think the market is taking all of trump's threats as threats and warnings? he will not actually put the walls up? chris: i will let the experts make that decision of ultimately where. this goes what is most important

is we have this delicate balance and on one hand we have this tariff threat looming. on the other sent -- on the other hand you have weaker currencies and lower bond yields which generally stoke stocks. the market is more focused on the latter. the message from leadership in europe is constructive. banks are very strong. it seems like the market is ok with that. jonathan: we will catch up with the director later on this morning. what do you want to know? what is your number one question? chris: the big question over the next four to five months is what is the pain threshold for some of the policies relative to the economy? the bond market will be my judge on that. when we go back to trump 1.0 what was misunderstood is there were some deep corrections in

2018. certainly even 2019 the market was beginning to come under some pressure. i am a little bit skeptical of this idea that there is some immediate trump 1.0. jonathan: we appreciate you. equity futures on the s&p. buy lagarde. chris: you buy pessimistic bankers. jonathan: you fade her view. lisa: i want to be a buyer of pessimistic central bankers. i want a t-shirt and i want to wear that on monday. i will credit you. jonathan: let's update your stories elsewhere this morning. here's your bloomberg brief. >> shares of amazon are falling nearly 3% in premarket. the company reported better-than-expected revenue and profits from the holiday season but the guidance for the quarter

fell short despite plans to invest $100 billion this year in ai infrastructure, amazon's warning it could still face capacity issues in its cloud computing division. president trump held a meeting with david bird at the white house amid growing questions over the company's future. that is because former president biden locked japan's nippon steel takeover. trump is due to book on the japanese prime minister today. and trump has taxed his vice president with overseeing the future of tiktok in the u.s.. portugal is reporting that jd vance will work with michael waltz on his first day in office trump issued an executive order giving tiktok a 75 day extension to find a buyer in the u.s. or face a ban. that is your bloomberg brief. jonathan: thank you. up next, president trump's tax agenda. >> this will be the largest tax

cut in history for middle-class working americans. the president is committed to working with congress to get this done. jonathan: that conversation up next with kim wallace. good morning.

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no tax on tips. no tax on seniors social security. no tax on overtime pay. renewing president trump's 20 tax cuts. eliminate all the special tax breaks for billionaire sports team owners. close that carried interest tax deduction loopholes. tax cuts for made in america products. this will be the largest tax cut in history for middle-class working americans. the president is committed to get this done. jonathan: president trump outlining his tax priorities with lawmakers as the party struggles to align on a strategy for passing the legislation. kim wallace writing, "a clear framework and strategy for enacting fiscal policy remains elusive for the majority. " welcome to the program. i want to pick up on that last line. by december, it is unlikely. why is it unlikely? kim: good morning.

there are two reasons. the margins are very narrow in congress. after that, as much three vote margin. december empowered a lot of agents to make demands before they were able to fund government and go home for the holidays. the second is the size of that and the size of the bill to renew the tax package and add additional tax cuts to it. you start with $4.5 trillion and it grows to $5 trillion to $6 trillion. an arduous process. negotiating the substance will be even more difficult. annmarie: is that why the senate is talking about this approach because they want a quick win? do you think that in the end they will be the ones who win? kim: that will depend on the president preference. yesterday was the first time you

saw the president engage in fiscal policy for this calendar year. similar to 2017, house and senate, mainly the house wrote the original tax cut bill before the senate picked it up. that is usually the course because tax policy starts in the house and therefore that usually sets the process. senate rules are much more difficult so usually you go last to see what you can squeeze through. lisa: a surprise was added yesterday, ending the carried interest tax break by private equity firms. is that real? kim: in two ways, no. when it was originally proposed, it had teeth and raise the money. over the years it has been eroded by the interest to do away with the changing of the law. relatedly, it does not raise much money now in its current form.

i doubt that there are a lot of forces focused on this as a primary offset. the messaging is probably not right for made trump based standpoint and you do not raise a lot of money. lisa: you said it is not quite right for made trump based standpoint. which base are we talking about? more broadly to a tax billionaire it is a very populist message and probably would appeal to a large swath of donald trump supporters. kim: it has been a populist message when populism was spelled with small letters. it remains one. it has never driven negotiation on tax policy. taxing the rich is a great slogan. it does not show up in the of tax policy -- it does not show up in the negotiations of tax policy. 2013, 2015, 2017, the higher end tax owners saw their taxes reduced each of those times,

disproportionately. lisa: what do you make of this being thrown in? if you can understand the strategy behind negotiations, which a lot of people say will be very difficult given that there has been some sort of unity among republicans so far, but that is only to placate the different parties ahead of a very vicious fight over the budget. what is your entrance about -- what is your inference about where the lines of fighting will be? kim: we are in february and there are no drumlines. that is usually a big step for the majority because of tight margins and data version. it is growing in washington among elected members of both parties. this process has been very difficult, chaotic. it has not yet produced unity.

not only has it not produced unity within the republican party of the house, there are very scant conversations between the house and senate republicans. that is why senator graham asked for a meeting with the president hoping it would catalyze the process. the difficulty is the constraints on elected members and there are many. while taxing the rich is popular, when you look at the spokeswoman who mentioned yesterday, most of those erode long-term healthcare and retirement funds for working people. in a package that would cut taxes for people in the top half of the income brackets, it is a curious mix. i don't think the messaging holds. annmarie: we know they need offsets. i also want to get your take on how much of that is going to be driven by the tariffs president trump has been talking about. kim: the u.s. brings in around $90 billion per year in tariff revenue.

it is in the offsetting receipts category. i have spoken with people who have modeled as much as doubling that. the whisper is that speaker johnson's back of the envelope has as much as $2.8 trillion over two years in tariffs. not many people think you can raise that amount of money. it will rely on tariff revenue to offset the spending. the take away is not much can they ultimately raise or plan to raise but the fact that they have admitted tariff revenue is necessary as an offset. we will have some tariffs later this year. jonathan: appreciate your time. kim wallace there. the tax priorities of the trump administration may be colliding with the thoughts of the bond bulls out there who got excited at the words of scott bessent early this week. no taxes on tips. no taxes on social security. no taxes on overtime pay.

renew the middle crime -- renew the tax cuts. there will be tax cuts for major american products as well. that is a long list. annmarie: it is a lot of money. chris verrone's point is what are they looking at the potentially pushed back on their spending plans? is it going to the bond market that ends up having a seat at the table and says this is too much for the deficit? lisa: this is why it is so hard for analysts to have any conclusion. on the one hand you have the sweet words of scott bessent saying that if you look at the bond market that will be the ultimate check on what we are trying to do. if trump's policies go into effect, you will get disinflationary growth. on the other side you have a lot -- we have these priorities and we can tolerate everything that comes with it and a little bit of pain is worth it in the long run. which is it and can the pain be tolerated in the bond market? jonathan: this will be a lot of

issuance at the front end. if the secretary is anything to go bike, who did not seem too interested. lisa: he was so nuanced in the way he answered that. he said not anytime soon. later this year when some of president trump's policies have gone into effect, if we get disinflationary growth that leads to some lower yields regime, we can think about what that looks like. essentially this is him saying with janet yellen's much criticized plan but also implying that if yields drop low enough, maybe they can turn out the debt. i am curious what is that line. jonathan: he said the opposite earlier this week in two interviews he had done, the 10 year would be somewhere else. that somewhere else will probably be higher. lisa: which is why he did not say it. it shows what he is so laser focused on not screwing around with the market right now because he wants that to be constant to create a pathway for the stability that donald trump is talking about. jonathan: the jobs report drops

at about two hours and five minutes. lots of estimates go into this. the medium at the moment is 1.75. the previous number was 2.50 six. very much focused on the benchmark revisions. we will catch up with wells fargo and bloomberg intelligence later this morning. look out for those conversations. up next on the program, shweta khajuria of wolfe research as amazon looks to keep up with a i demand. from new york, you are watching bloomberg tv.

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jonathan: two hours away from the jobs report. 1.75 is the number we are looking for. the previous number, 2.56. going into the scores with a three-day winning streak on the s&p just about unchanged. on the nasdaq 100 negative by 0.1%. lots of conversation about the bond market. tens right now. just about unchanged. 4.43. priya misra on the program a little bit later. what would generate a bigger move? a weak report or a strong report? lisa: she thinks a weak report will cause ripple effects in the market which makes sense given how much we have reset away from the expectation of overheating to searching for cracks. that is the focus of so many.

if we don't see cracks, all systems go. no one is taking the number that seriously on the upside. they are talking about the fictitious upward revision. jonathan: the 10 year yield is on track for its fourth weekly decline. the fourth consecutive weekly decline. i had to check this multiple times. the longest streak going back to 2021. it has been that long. lisa: we have gotten upside surprises steadily until six months ago. then you start getting those downside disinflationary surprises. now it is maybe the catch-up that we probably should have had. jonathan: guess who else is on a winning streak? the japanese yen. dollar-yen right now 152. just about weaker against the dollar. chris verrone on the program a little bit earlier making the point that this is capturing the flow story.

this speaks to the outperformance you are starting to see in the market. the money going elsewhere. lisa: a lot of people said the reason the u.s. markets had been so strong for so long was because there was such weakness in japan and these other economies that they had nowhere else to go but the u.s.. if that shifts, does that flow of money shift as well? what chris verrone was saying, it is correlated with the weakness you are seeing. jonathan: and the strength we are seeing on the decks in germany. 10% gain so far this year. let's get you some top stories. scott bessent expressing confidence in gauche, telling bloomberg he vetted the treasury employees on elon musk's team and there has been no tinkering with the department payment systems. annmarie: he called it one of the greatest audits in his life. the issue they have is on the other side of pennsylvania avenue. republican senators objecting. there is cause for concern that these individuals have access to

the treasury system. we saw a judge limit that access and only giving the workers because a group of unions accused them of illegally sharing members information. i'm sure it is of providing a ton of headaches. lisa: scott bessent did a good job of smoothing it over. he said, it is not us, it is the fed. looking forward, i will not give them guidance. things are normal and they will operate as status quo. that was a message that was very much on the make it and break it. annmarie: democrats and republicans under the treasury departments of either party will always say it does not have the power to prioritize these payments authorized by agencies. but obviously people are looking into that. that has been a cause for concern. jonathan: the complete policy platform has gotten lost, buried by the trade headlines. buried by the tension. we have to keep going back to the tax.

the tax cuts could be massive. one of the standouts and the surprise for us all was calling for an end to the carried interest tax break. did not see that coming from the president of the new united states. annmarie: on the campaign trail we called this the oprah winfrey election. no tax on tips. no tax on overtime pay. donald trump was throwing spaghetti on the wall when it came to taxes. he wanted tcja and he wanted to expand it further. many people are interested because a lot of private equity firms that backed him and will probably be calling the white house saying what is this about. you brought up a great point earlier which is the fact that for populist and those individuals in the maggot base, this will really resonate which is why someone like jd vance might be behind us. -- individuals in the maga

base, this will really resonate which is why someone like jd vance might be behind this. lisa: if that gets taxed at the same rate that everyone else does, that could raise $12 billion. a lot of drops in the bucket when it comes to the overall u.s. budget to fill these plans. if it is realistic, it shows that maybe this will be a different type of budget plan than many people were expecting. jonathan: i would suggest it is about the politics. a really good comment 15 minutes ago, whose base? the president base. this is the message, for my populist president. lisa: it is a president who has many different bases and the base he has surrounding him seems to be the base that is probably earning some of that money from those $8.2 trillion of private equity assets. the question is how much does he have an eye on what the message will look like and what the headlines are. annmarie: this is one of those policies you will see and you are like this will create

weird bid flows in washington, d.c. this is something that bernie sanders would vote yes on. jonathan: if you vote the country, i think you would get the obvious answer. this is where they are right now. lisa: everyone has agreed and one of the big questions is why has it been so hard to get through? can you push through that. annmarie: i still maintain it is not happening and if it does, i will buy all dinner. jonathan: president trump meeting with the japanese prime minister. officials telling bloomberg trump met with the u.s. steel said she wil -- the u.s. steel ceo. could there be a change in tone? annmarie: potentially. donald trump has been doing everything everywhere all that wants. what has he not commented on? this u.s. steel take over. potentially there is a way he can sell this to the american people. i might allow this deal. i spoke to the ceo. the company needs this money but

i will still protect u.s. aluminum at the same time and steel. maybe he will put up tariffs. lisa: i love imagining these meetings. here, i have this. take this thing of roses, chocolates. here's the deal we will make. and they discuss it. is this the goal to be able to have deliverables? we get this, they get this, we made a deal. annmarie: he is very transactional. so yes, is there a potential -- if there is a potential deal to be made, he will make it. jonathan: disappointing comments from the current quarter. this ceo warning that earth will be lumpy due to power constraints. shweta khajuria rating the stock outperformed. welcome to the program. what we just heard from amazon, how much of that was in line with what we heard from other players like microsoft? shweta: thanks for having me. i would say the parts that were

similar at amazon to microsoft and google and met it was around capex and cloud. what we heard from andy were two things. these investments in capex for 2025 are leading into what they believe there is demand for. they would not be spending this money if they did not know that there was demand coming because you procure all of these infrastructure and data centers only if there is demand and we have heard that time and time again from school cloud. that was part one. two was his comment around and reaction to what happened with the model. these are the same things we heard from zuckerberg at meta and google around if training and interest go down, the intuition is that the demand for

ai will likely expand because there will be so many more uses that will be attractive around applications used to drive ai computing. against that, all of these companies are leaning into capex spending. lisa: some analysts point out that this is a behemoth that will do very well. we don't understand why people are punishing them. four of the magnificent seven have not met -- have met with a disappointing response. how much do you think this is investors saying we are worried about valuations and we will not extend things further even though there is that same promise of cloud computing? shweta: it is more of that. if we look at valuations, all of the ai names have done well. we are very limited upside for multiples in meta and google

given that they also have the search and even amazon of the mega caps names that we cover, i think amazon has the best valuation on a growth adjusted basis but it is more of that against the fundamentals. i think there is a common belief that ai demand and ai is going nowhere but given where the multiples are, perhaps we will have to see greater upward revisions on earnings before they get more credit on the share price. . lisa: two underscore this point, is this more an issue of people jittery about valuations and the flow of money due to other considerations and less about deepseek and the feeling that you can really do it with less? shweta: i think so. the knee-jerk reaction with deepseek was that this was negative for the mega caps things -- make a cap names. i will refrain from talking about nvidia.

as more commentary came out from all the ceos, it is becoming increasingly clear that perhaps there is demand that is more to come and all these companies are looking at our model under a microscope and will figure out a way to lower costs. costs will likely come down for training and for inference. the question is we need to see an accelerated path for returns. until then, you may not get full credit. jonathan: good to catch up with you. shweta khajuria of wolfe research. amazon is down by 3%. constrained by capacity. not a bad problem. a bad problem is too much capacity and not enough demand. that is not where they are. lisa: yet, it has not worked. all of the main hyper scalars that said the same. the only reason we did not blow it out of the water was because of constraints. still andy jassy tried to do the good messaging. he said we think every

application will be reinvented with ai inside of it really doubling down on the promise of this. not enough. jonathan: it is a show me market for some of these names. border equities just about unchanged on the s&p. let's get stories elsewhere with your bloomberg brief. yahaira: israel defense force says it's air force did a strike in lebanese territory on two military sites. the site contains hezbollah records -- weapons was is a violation of the cease-fire agreement. dallas fed president lori logan has suggested that interest rates may already be near a neutral level of eliminating the need for further rate cuts even if inflation continues to cool. she said the fed would need to lower rates if the labor market deteriorated. take a look at porsche shares down in german trading. the luxury automaker says profits will slump this year. costs are mounting after

executives misjudged how eager sports car drivers would be to turn electric. it turns out they are not so eager so porsche is saying it will take a hit of as much as $830 million as it adds more combustion engine and hybrid models. jonathan: thank you. it is down to the engine. you cannot replicate that. lisa: honestly, do they not understand their clientele? do they really not understand the people who want to drive up and be seen? they don't want to seamlessly come in in their porsche. jonathan: well said. speak to matt miller . equity futures unchanged. up next, we are counting you down to payrolls. >> if you ask in the economist what the hardest month to forecast is they would say january. we will see this uncertainty on what the actual trump uncertainty would weigh going forward. jonathan: we will catch up with sarah house of wells fargo and

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jonathan: treading water. how many times do we do this? equities going nowhere. euro-dollar going nowhere. the bond market going nowhere. the 10, 4 .43. annmarie: even though we have done a lot this week and we have worried about different areas, it has been running in place. are we really leading this week with any clarity or direction? on a broader level in life but i also wonder about markets. jonathan: this is a therapy session again. annmarie: it feels exhausting without conclusive evidence that we are nearing some sort of measure of progress. jonathan: which is why it is

exhausting. precisely why. the jobs report drops at 8:30 eastern time. we are counting you >> down the payrolls. >> if you ask any economist what the hardest month to forecast payrolls is they would say january. the last few january's we have seen this very low layoff environment and the low layoffs have really helped boost the january payrolls number. the past two payrolls, we will see a little bit of this pre-election uncertainty unwind. the actual trump uncertainty i think will actually weigh on how much some of these we have going forward. jonathan: investors eyeing the payrolls report in under two hours. economists are expecting strong growth and flat unemployment. anna wong joins us for more. good to see you. let's get to why january is so difficult to forecast. what is special about the first month of the year? anna: there is weather and the last couple of januarys it has been unseasonably warm and as a

result, i still have ptsd from the last two januarys where we saw a gangbusters month of job prints. the second thing is the seasonal factor. this year it is difficult because we are expecting large downward revisions to the jobs number throughout 2024. the benchmark revisions will likely reduce the non-seasonably adjusted employment level in march 2024 by about 700,000. further out there would also be about 200,000 downward revisions to the birth and death model. analysts will be changing how they estimate the seasonal factor. the biggest component is the seasonal factors which could subtract or add about 50,000 from the consensus. lisa: which is why jonathan pringle called this number random generator yesterday.

some of the trends you are talking about, i want to talk about the revisions and how it could shift the narrative for 2024 where people are worried about an overheated economy. how much will we reframe our knowledge of the 2024 jobs market after the revision you are expecting of a downward revision of 700,000 jobs? anna: the seasonal adjustments because downward revisions have been to the nonseasonally adjusted numbers. once you factor in seasonal adjustment, it would show very close to negative or actual negative prints in september 2024 and october 2024. it would be a very minor negative print. in that sense, i don't think that is enough to change the narrative that you did see improvement in the labor market, maybe in the last couple of

months of 2024. there is some forward-looking implications which is that if the bls should downward revise the birth and death factor model, it means that in 2025 for each payrolls we will be seeing significantly less support from this artifact of the birth and death model. last year the birth and death model contributed to 1.2 million jobs added out of 2 million jobs actually added. a downward revision to the model has significant forward-looking implications for future forecast is. jonathan: appreciate your input. lisa mentioned jonathan pingel calling it a random number generator. i think we called it that for the him. others call it an exercise in predicting noise. lisa: you are the one who said that is the implication here. jonathan: i think jonathan might be getting a call from his boss.

lisa: a different jonathan. jonathan: sarah house of wells fargo joins us. welcome to the program. the benchmark provisions, how big are you expecting the revisions to be? sarah: we are looking for them to be in the ballpark of the preliminary estimates which is an 800,000 downward revision. you have to remember these apply to the period before march 2024. the benchmark revision is close to one year in the review. anna was right in emphasizing the seasonal factors. what is happening with the birth death model in terms of what the downward revisions imply. the birth death model is the sir -- air that we see in terms of the survey. that does point to slow or momentum that we had in the second half of 2024. it will be interested to see the more recent momentum of the past

few months. you see things picking up in the fourth quarter after we get through these revisions? lisa: you noted that they will probably not be enough to change the overall picture of solid hiring. do you think there is a higher bar right now for the number that we get? the random number generator that jonathan said yesterday. do you think that just to show that we are seeing upside, that it will not wreck markets but if we see downside, that could be concerning? sarah: the general narrative has been that the u.s. economy and the labor market has been much more resilient than most anticipated. in some ways an upside surprise would be less of a new development than if you were to see a condition weaken more than expected. the risks are asymmetric. annmarie: the fed said yesterday you could overheat and deteriorate but if you could

freeze the job market exactly where it is, that is not a bad spot. it looks like something approaching full employment. do you agree? sarah: overall when you look at the levels of the unemployment rate, the pace of hiring, we are still seeing them at heavy -- healthy levels. yes, we decelerated over the past year. it looks like last year was not as strong as what is currently being reported. with unemployment at 4.1%, that is smack dab in the fed's tenancy of where they think the market should be to get consistent with their 2% inflation target. when we are looking at those, the absolute state of things, we are doing ok. but there is still concern as we head into 2025 with some of the policy uncertainty, some of the slide in demand we have seen over the past 2.5 years. where do things settle? do we stairway we are or is there further softening to go -- do we stay where we are or is

there further softening to go? annmarie: where are you hoping to get more details of that, tariffs or immigration? sarah: the jobs market story will be telling. we are looking for unemployment to hold where it is even assuming you get some step up in tariffs which would dent demand and growth and hiring. given that we are likely to see supply growth get much more constrained. the numbers today might not show that. it may look like the labor force is up a lot from last year due to population controls. overall we are looking at weaker inflows in terms of immigration, potential deportations. i think that more constrained supply aspect will be a really important story in 2025. it will keep the jobs market roughly balanced even as you have a softer demand picture than what we have been dealing with over the past year. jonathan: thank you. sarah house from wells fargo. the range as low as 105 to as

high as 240. we talked about jonathan pingel. the most accurate forecast of the payrolls, the most accurate forecast for last year, he is looking for that 240. lisa: the more we focus on revisions and the birth death model and random numbers, the more people will ignore and move on. maybe that is exactly what people in the market want. jonathan: at 8:30 eastern. annmarie: i don't know if it is a downside surprise that could potentially check the markets. it could be 450 and people would say it is a random number. jonathan: you really want this weekend, don't you? up next on the program, priya misra of jp morgan, jain for early, the second hour of bloomberg surveillance is next. i have no idea of lisa will go or stay. the jobs report if you minutes away.

>> i think the most important is the labor market. >> some of the data has been overstated. >> we will see more challenges to labor supply. >> we expect unemployment to echo up if tariffs are sustained. >> you will see a payroll impact estimate from slowing immigration, but it will be harder to figure out what actually happens to on employment. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: do you remember the trade war? that was monday, this week. it feels like months ago.

90 minutes away from the payrolls report. the estimate in our survey, at the moment, 100 75,000, the high 200 40,000, the low, 105,000. a bit of heat from the american story, the economy a little bit softer than some expected. jobless claims still in the low 200,000's, the ism still in decent territory. lisa: a lot of the progrowth policies we have yet to see so far have moved to the back foot, and people are focused more on the idea of may be slower growth from lack of certainty and tariffs essential tariffs. which is the reason why the best interview coming up is someone who says a week report will have a bigger impact than a stronger report, and that sets up the framing. jonathan: nice to get you back

to promoting programming again. the most important report until the next one. big week for bramo. the 10 year yield, a four .43. the treasury secretary saying they are very focused on 10 year yield, than the following day, we hear a tax plan that includes a long list of tax cuts and very few offsets, even though we got a surprise. annmarie: when it came to carried interest loophole. people i am talking to say they do not think it is happening. what was more interesting as i started the week, especially when i caught up with jason smith, chairman of ways and means, thinking the house was going to get railroaded by the senate. trump went into the evening with some of these congress members, and today, potentially, you get the bill coming out, or theories of what will be in it, coming out today, and maybe he wants to go back to his one, big,

beautiful bill, which means a lot of tax cuts, which means a big deficit. lisa: the take away is it is messy. this is messier than executive orders talking about tariffs. the messiness is what people are putting into their models that may be progrowth emphasis will not come as quickly as people thought. jonathan: we started we talking about trade and close the week talking tax cuts. i want to know how one complements the other. hopefully when we catch up with kevin hassett, the national economic council director later this morning, what are the ultimate objectives here? is it a drug war, not a trade war? is it about getting concessions on the southern border? is it about reciprocity, thinking about china, europe? is it about deficits or paying about these tax cuts? annmarie: when it comes to donald trump and the fact he is transactional, when he looks at tariffs, it is everything.

kevin hassett called it a drug war when it comes to canada and mexico, but potentially with these tariffs, they talk about this could be incredible revenue raisers and to offset. potentially, that means you need the tariffs first to offset the tax cuts and the longer list of tax cuts we got last night. jonathan: equity futures at the moment totally unchanged. this market is going nowhere. coming up, priya misra from j.p. morgan. terry haines of pangea policy. and we catch up with ellen zentner later this hour. we begin with stocks steady ahead of the payrolls data. priya misra writing valuations imply the rate reaction into payrolls is asymmetric. a weaker payrolls report will have a bigger impact than a stronger report. priya joins us now for more. good to see you. why is at the case when rates have drifted lower the past few weeks? priya: rates have fallen.

if you look at why we got to that 4.8% on the 10 year, it was driven by the fear the fed may have made a policy mistake, maybe re-accelerating. that has been taken off. inflation looks to be at the average of course cpe, at 2.3%, close to the fed target. and the fed message has been we are recalibrating. the first 100 basis points are done. after this, we will have to wait for more certainty. the other part is the market. a little ahead of itself in terms of fiscal. it was always going to be about sequencing. we got trade. trade is creating all this policy uncertainty. for skill will be messy. we will spend all your talking about fiscal, because there is just so much, and so many stakeholders. some of that move from 4% to 4.8% was that. there is an underlying fundamental assumption of u.s.

exceptionalism, the fact that the soft landing is solid, the economy is strong. and the underpinning is the job market. if that starts to crack -- and we have seen narrow job growth. what i watch for -- today will also be messy because we get benchmark revisions, wages. let's look at the totality of data. hiring has been slowing, but if it is slowing to a low -- worrying level, that is when rates start to price in. we are pricing in one and a half cuts from the fed, which you should always price in some chance of a further cut, because the fed thinks that policy is restrictive. the fed is telling you there reaction is restrictive. 4.4%, 4.5% is not restrictive. if you get 100,000 -- we do not even know what is weak. 100,000 used to be normal. i would argue it's weak now.

if you get something like that, the market will price in more cuts. lisa: that is exactly what i wanted to go, to pull out ferro's random number generator and look at what cracks could look like and what the response would be. would we get a huge rally in the long end of the yield curve not a commensurate risk on type rally in stocks and credit? priya: it depends where the weakness is coming from. if it is coming from a broad-based deceleration in the labor market -- it is just one report, so you may not get such a big reaction in any market, but if we have policy uncertainty, particularly on trade, that is negative for growth. if you start to see maybe it is a weakening of the labor market -- we look at the sectors, where is the weakness coming from. i would say layoffs are still low, so you may not get a very big reaction today. but i think the curve is likely to flatten, and the reason for

that is we do not know what the fed strike price is, meaning at what point does the fed start talking about rate cuts? they will not respond to one number. it is the five-year and out part of the treasury curve. if the economist not that strong, we get the shock or policy shocks, the fed may not hike as much, so risk assets may struggle a bit with a weak number. the fed will say let's take a step back, we do not -- i think a weak number is weak for risk assets and good for treasuries. we have seen that stock one correlation come back as inflation fears have receded. treasuries will do well. everything else may struggle. lisa: i want to talk about the totality of data and the revisions and how you look at something that could potentially take heat out of the story of 2024 but does not tell us that much necessarily about 2025.

how does that factor into your equation? priya: it is important to have that fundamental view of the economy. to the extent, we will look at the totality of data. look at the markets pricing in. now let's talk about tax. it is fascinating, in the sequencing of tax, what we got earlier this week was talk about the 10 year, which was great. we have argued, and i think i've said this before, there is a political constraint in terms of how much they can get done on policy. there is a market constraint. what we got from the president, from the treasury secretary yesterday, they acknowledged that market constraint. as we go into the tax discussion, different from 2017, where it was all about how do we get tax cut, it will pay for itself -- we are not hearing that now, we are hearing let's look at the 10 year, which is not something the fed can really influence. they cut 100 basis points --

it is less about fed and fed independence. they are telling us they will need offsets, because the 10 year does impact the economy. the economy is intra-sensitive. there were a lot of positives, fiscal, etc.. annmarie: what is the pain threshold in the market for their policies? what is your guiding light? priya: i would say 5%. if you ask me for number. the speed matters, though. there's nothing magical about 5%. i would look at 5%, i would look at real rates. i think real rates matter a lot more than nominal. this has been a real rate driven move. that 4.8%, we were starting to see risk assets start to pay attention. anything above 4.5% to 5%, if it is driven by real rates, driven by expectations of fiscal expansion deficit financed, then it is tricky. this idea that tariffs will pay

for trade -- if tariffs were a negotiating tool -- or that tariffs would pay for fiscal. if it is a negotiating tool, you cannot have it both ways. you cannot delay tariffs and expected to pay for it. so i would say a quick rise in rates getting to that is a problem for the economy. annmarie: it is true, the rhetoric for tariffs aims at both. but can policy coming out of washington disrupt the soft landing you are looking for? priya: i have to think that policy uncertainty matters. maybe it does not matter for the consumer -- i have a job, my real income is growing, i can continue to spend. companies, as they continue to spend, capex, hiring plans -- certain sectors -- we will see more dispersion, absolutely. higher cost of capital, higher policy uncertainty. there will be dispersion in

terms of winners and losers, which is why it is important to be diversified into your credit work. what i am watching is what a company saying in terms of capex and hiring plans? will deregulation set off trade uncertainty? we will have to see? -- we will have to see. jonathan: priya misra there of jpmorgan asset management. bank of america put this out earlier this week -- our orbit sentiment indicator still tracking at a record high. mentions of better or stronger versus worse or weaker jump to the highest level since the fourth quarter of 2021. that gives you an idea of how rocksolid corporate sentiment was coming into 2025. what we discussed early this week, do not squander that. we want to see that translate into actual action -- hiring, capex -- throughout the year and beyond. if it is uncertainty about the course of policy, these companies will hold back. lisa: right now, they are still in that sweet spot, where if you

resolve that in short order, they potentially go back to that excitement. we already heard that from some of the earnings calls. forward, gm, even amazon ratcheting back expectations as a result and what they plan to do. annmarie: what i was surprised with? front page of the fte. dealmaking has its worst january. it fell nearly 30% this january as opposed to since 2015, 1 of the worst in the decade. jonathan: markets wide open, financial condition still accommodative. i would say just wait. still only february 7 right now, only the third week of this administration. lisa: if we are exhausted trying to keep track of it, imagine a corporate executive. why would they go when it is unclear what type of tariff situation the have to price in and what type of international

risk they may be occurring. annmarie: the uncertainty piya was talking about. not only that, will the tax code potentially change? that might be a 2026 story. jonathan: equity futures just about unchanged. let's get you an update on stories elsewhere. here is your bloomberg brief with yahaira jacquez. yahaira: the japanese prime minister will meet president trump today in washington. ishibe told reporters he wants to confirm cooperation over economic and security issues. during the campaign, trump told bloomberg he had concerns about japan's trade surplus with the u.s. and yen weakness. pinterest shares soaring in the premarket come up 19%, after it posted strong revenue and gave an up eight sales forecast. the result signals its advertising business continues to grow, despite increased competition in the social

networking space by giants like meta. the buffalo bills' playoff hopes may have ended prematurely, by they can officially claim to have the league's best player. josh allen won leak m.v.p., beating out lamar jackson in one of the closest races in years. that's your bloomberg brief. jonathan: up next, the president's fiscal priorities. >> the best thing we can do for predictability is make the tax cuts and job act permanent. that would be the single best thing we could do for predictability. jonathan: that conversation up next. we catch up with terry haines of pangaea. ♪

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around the corner. the median estimate in our server is 175,000. the number drops at 8:30. equities go into it totally unchanged on the s&p 500. in the bond market, yields unchanged, the 10 year short of 4.45. under surveillance this morning, the president's fiscal priorities. >> the best thing we can do for predictability is make the tax cut and jobs act permanent. that is the single best thing we could do for predictability. we can go back to 100% expensing and add new features i think business will be happy with, but the most important thing is that it filters down to working wages. the real priority is fixing the affordability crisis for the american people. jonathan: the treasury secretary, scott bessent, making

the case for passing president trump? tax bill. -- president trump's tax bill. terry haines writing should the tax bill go to plan, it convinces markets to fuel u.s. economic exceptionalism for longer and with more fervor. we caught with kim wallace who made the case he would be surprised to make -- ca tax bill passed before december. are you on the same timeline? terry: no, not at all. good morning, everybody. what they have got to do is pass this thing in the first calendar year. they know that. i've the tax bill at 80% likely to happen. the reason why is you have congress that knows it needs a signature accomplishment, and you have a president who wants things. what you will hear from washington tax boffins now is all process related and kind of third level stuff. bessent will give you the clue

here. what they want to do is preserve united states' economic exceptionalism in the markets for as long as possible. they need a tax bill for geopolitics to keep america strong. they need a strong economic policy to believe the domestic economy and make america strong abroad. and they have to get rid of a world where death service is the biggest expenditure, which imperils all the stuff i just mentioned. you have a president interested in doing big things. this is a time for big things, not small ball. annmarie: is it a time for one big bill or two? this will be incredibly hard, one or two bills, to make sure this republican congress signs off on it, given how slim their majority is. terry: it matters some great i will not say that process does not matter at all. of was it matters some. why am suggesting is you should not be -- no one should be

diverted by process as if it is the main thing. one bill, two bill, they get this thing done. you may recall, in 2017, congress fact around -- faffed around with health care. that will not happen this time, they are all about economy, economy, economy. anything that helps achieve the big goals i just mentioned is what the process is going to end up being. beyond that, it is minimal. the people in favor of one big bill, by and large, are people afraid to cross trump. if what ends up happening is two bills provide a quicker start to all this, he will be that, too, and he said so. annmarie: the president has

talked a lot about tax policies he would like to see. yesterday, we got carried interest loophole to the list, which took everyone by surprise. for decades, washington has been trying to close this loophole, and they failed. why is this, all of a sudden, a trump policy? terry: i thought you summarized this very well in the last hour. it is by and large political. it is certainly not a revenue raiser. there is one source i have seen recently the estimated it raising something like $12 billion over 10 years. it is a rounding error in the bigger picture. but you are absolutely right, it puts him on a populist political path. if it does not happen in the end, it does not happen in the end, but that is not a frontline issue here. lisa: we got the review for the potential bill. it is not great, not great for the wonderful 10 year yield that scott bessent looks at. they say it would boost interest

costs by about $1.3 trillion over the next decade. how feasible is it that this congress has the capacity to pass this bill and not just totally up in the bond market -- upend the bond market? terry: here is a perfect example of what i mean by process. everyone is focusing on the existing rules, assuming this is exactly like 2017. it is not at all like 2017, in part for the reason you mentioned. there is much less tolerance for extending debt and deficit than there was in 2017, and you had a relatively weak president and a relatively strong institutionalized senate in 2017. the biggest debate happening right now is not popping up in washington conversations to markets very much at all, which is whether you will use current

policy as the baseline or current law as the baseline. if you use current law as a baseline, you are into what my beginnings group talks about there, but if you change into current policy, then you become much freer to actually make the tax cuts a whole lot bigger and free up a whole lot more on what your pay for's are and your spending are. i think i know the way it is going, and it is not going small balls the way it used to be. lisa: it raises a question of will it be allowed by this congress? some people point to the fact you have seen quite a bit of unity when it comes to confirming some of the nominees. a surprising degree, to some people. do you think that is just playing nice ahead of the hardball expected around the budget, or is this setting a precedent for what is the common, that there will be that unity? terry: there will still be a

good deal of unity. the senate in particular has done a good job of defending itself against trump demands. you will remember, back in november, trump was blustering on about how he wanted his nominees confirmed immediately, and guess what, we are still confirming nominees. a lot of this stuff is being done fairly quietly, but at root , people that are talking about maintaining the current institutional rules around the tax bill in particular are essentially saying that the senate parliamentarian will be more powerful than the president of the united states and majority of senators, and the will of lots and lots of the american people, and probably markets. so unfortunately for the senate parliamentarian, i have taken the other side. jonathan: terry haines there a pangea policy. did we settle that debate, 25 versus 2026? annmarie: terry thinks it has to

be done this year. they have to have a win. next year will be challenging. you have midterms coming up. which is why you could potentially get one bill. lisa: there's also this concern about the market. if you do not get some of these progrowth measures, how do you offset other things coming down the pike? jonathan: have to define the market. not the yield market. the bond market might be happy with that. the kind of miserable happiness the bond market has. ellen zentner of morgan stanley up next. ♪

jonathan: the jobs report is 60 minutes away. the estimate on our serbia's 175. equity futures are unchanged on the s&p 500, going nowhere. likewise on the nasdaq and russell. let's get your morning movers. yahaira: we start with sketchers, down 12%, and that stock is taking a hit after earnings fell short of analyst estimates, and that was for two reasons. first, that was a big headwind for the company and on top of that, it is continuing to see weakness in china, so because of this and potentially tariffs, sketchers gave a cautious forecast and investors were not satisfied. next, expedia.

shares are popping up some 10% and that is on the back of strong bookings over the holiday season, and it gave investors something they loved, a quarterly dividend of 40 cents per share starting march 20 25. you are seeing a number of price target raises at j.p. morgan, barclays, and even an upgrade by hsbc. we have another riser, pinterest, soaring 20% because ai is actually paying off over there. apparently there ai tools are more lucrative for businesses because they are better able to target people and that contributed to a record quarter for the first time, revenue coming in above $1 billion. yes, you can see my pinterest board after the show. jonathan: i will take a look. i have one, too. sonali: for what? jonathan: i renovation i did not do but it still exists. would you like me to share?

lisa: i don't have a pinterest page. jonathan: i was surprised by my experience. i will share that another time. also things going on there that i did not realize. annmarie: i have a pinterest board. jonathan: amazon delivered a disappointing outlook. growth could be lonely, and the company could face capacity issues in the cloud computing division, echoing concerns from microsoft this week. stock down by 3%. lisa: this goes to the idea if this hold has four of the six magnificent seven stocks down after reporting earnings at a time where they cannot keep up with demand, which is a great problem to have, is this the beginning of a shift, where investors no longer tolerate massive expenditures because valuations are too high? even if you have wonderful words of promises of incredible things in the future, part of this is a deepseek moment and an excuse to

sell at high valuations. annmarie: you forget they had a great holiday quarter. i find that interesting because they've been dealing with the likes of shein and temu and i wonder if they can squeeze those e-commerce companies more because of trump's possession onto minimus, those are the ones were going to have one of the biggest issues with the new tariff policy. jonathan: putting it all together there are some mixed results across the big names. lisa: it has been remarkably soft in terms of the take away. one thing i thought was interesting about amazon, they missed the currency drag and we talked about the idea of the strong dollar impeding their abilities to meet expectations. they would have had the top end of the guidance if they had not taken a $700 million hit because of the strong dollar. you will hear this more from companies as they navigate the

international space. jonathan: the japan story has changed a lot the last month, too. lisa: these are little tweaks in the global picture that connected good difference at a time when companies are losing patience. jonathan: some of the biggest volatility the last few weeks in foreign-exchange, particularly monday. a judge temporarily delayed the deadline for federal workers to decide whether to accept an offer to leave their position with painter september, blocking the trump administration from holding the offer. annmarie: the deadline was yesterday. basically, the judge wanted to look at the legality of the deferred resignation program but more than 50,000 federal workers signed up for it, that is 2% of the workforce that already signed up for it and now they are extending it and potentially we will see more sign up for this. very interesting, this will go

back and forth. jonathan: this is just the beginning. you get the real feeling that this could be an offset for the tax cuts they are sent to deliver but a lot of people would question how easy that might be. lisa: i walked away from scott bessent's injury yesterday more confused with how they would go through with the cuts. it is being attributed to an accounting to get efficiency but who will implement that? jonathan: final story, the philadelphia eagles gearing up for super bowl lix on sunday in new orleans, the chiefs looking for their third straight title. president trump said to become the first sitting president to attend the game in person. remarkable. did not know that. annmarie: it is the reason why pam bondi, the new attorney general, the next day, where did she go? she went there to talk to law enforcement to make sure this will be incredibly safe because the president of the united states is going. it is a smart political move.

i cannot get over how silly it was that biden decided not to take that super bowl interview last year. you're going to have eyes of the entire country on you on sunday evening. lisa: you know the eyes are going to be on? travis kelce is going to be playing, and his girlfriend -- jonathan: is this tailor swif shot? lisa: you had trump come out and basically say i hate tailor swif because she endorsed kamala harris and they are both going to be there -- taylor swift because she endorsed kamala harris and they're both going to be there, so there's this interesting tension. jonathan: in the same box? i will tune in for that. i cannot believe it is still sunday night. are you going to be doing this on presidents' day weekend? lisa: just because you cannot watch it real-time. jonathan: i would love to stay up and watch this. lisa: just wake up at 3:00 and watched the replay with a bowl of chips. jonathan: it's not the same, you would like to live it. just under one hours time at it

:00 eastern, jobs numbers. morgan stanley writing, it makes the january job report difficult to sift through. but i don't expect those to change the underlined picture of a still strong labor market. ellen joins us for more, happy friday. we have had pushed back to that strong view. we heard from citi who made the case that this is a loan turn in the market. layoffs are low, and they make the case that is inconsistent with the healthy labor market. what would you caution back? ellen: we are looking at headline numbers, you're looking at 150,000, 120,000, those are strong net job gains, but we economists would always like to see more turn in the labor market. it means people have a more healthy view of their prospects of leaving a job in getting another. there is a lack in the u.s. economy overall, so i don't push back on the citi economists

saying there's a lack of turn. there is a lack of turn overall, and you would like the economy moving and shaking. it means you are on better footing. is this the best labor market we have ever had? probably not, it is slowing but it is still darn good. there were some wildfire effects, we are going to have to watch going forward federal employees. that is going to be a hit, you almost act echo does it matter if you reduce government employment. they make more than the median wage in this country. that is still a job in aggregate demand. the ones taking the payout, we are almost surprised at how many people signed up for it, why not? for eight months, you get paid eight months worth and it does not bar you from going to the private sector and looking for a job. i would take it. [laughter] lisa: it seems like on a friday,

you are the same place we are in and you are wearing two hats of chief economic strategist could also someone who is leading on investing. do you care about the nonfarm payrolls? people say it is basically an exercise in noise or it is going to be a random number generator, the numbers are all distorted, how much is this going to matter? ellen: the high-frequency data can be frustrating, but you step back and they do tell a full picture of the economy and i'm thankful that we do have the agency redo to put out robust data, and i'm sure you have had many guests talking about the response rates being lower overtime and the question of the integrity of the data, but in the united states, we enjoy an incredibly robust landscape of data, so i do care about today's print, but what it tells me about the bigger picture, and

that is going back to the lack of turn, saying we still have low unemployment rates, we have natural disasters that knock around the data, we have government and doge making for an uncertain environment, but we know right now the labor market is ok, inflation is coming down, and the fed does not need to do anything for as far as the eye can see. lisa: where do you expect the lack of conviction that some cfos have right now because of all is the uncertainty and a lack of turn in concrete knowledge and what is to come. where would you expect that to show up in terms of hiring or investment? brian: -- ellen: it continues to be the case that we are not laying off but hiring continues to slow. what you look for is that turn when it actually comes to layoffs because labor is your largest business cost and if

other costs are rising, where are you going to cut? it will always fall on labor, so we are starting to get the first sentiment surveys among business with a are concerned about tariffs and the bottom line going forward and jobs will be next, so you have to look at jobless claims and see if this pickup. annmarie: so policy could be the turn in the labor market? ellen: it is about what gets implemented and when, and if things are limited, that is when you can say what does that mean for my bottom line and how do i adjust accordingly? jonathan: we are -- annmarie: we are in a moment of where we are uncertain were donald trump will go, so where do you go? ellen: uncertainty creates policy paralysis for the fed and for is this decisions, household decisions, it just dampens

overall underlying activity in the economy, and we just sort of hunker down and see what is going happen. it is just an extremely uncertain year and start. president trump signed more executive orders in the first seven days and all the past presidents the first 100 days, and you see how many actually get acted upon, not many, and as you stated, a lot gets tied up at the courts, but that is the uncertainty. jonathan: this is the piece of the tariff story was not discussed enough. exporters could drop prices but if it ends up with importers, by definition, they have to pay the tax and they have one of two options, passing on to the consumer, but if you are knocking on the price dollar, you have to take in the margin, and that is where you start to see the weakness in the labor market as they look to cut costs elsewhere and pull the lever that they've been reluctant to

pull the last few years. lisa: something repeated by jonathan penngle, jobless claims become more important when people are looking for a signal. jonathan: i was surprised that it did not come up in the news conference, the wildfires, how much disruption are you expecting over the last few weeks? ellen: as much as 40,000 off the top of payrolls. we are going to get that within a report with annual benchmark revisions, as well, so sifting through what that means, difficult, but the overall number we will see will be an ok number and then you assume it would have been higher, if not for the wildfires. does that mean they don't matter? absolutely not because people are displaced and they need to go somewhere, and the climate events are creating regional displacement around the country. we still see it from the hurricanes last year. these things are back to back to back, not just dealing with one

major climate disaster here and there, these are things coming back to back and it is disruptive. jonathan: we expect a big effort by mike mckee at 8:30 with details, two i, ellen zentner of morgan stanley. -- thank you, ellen zentner of morgan stanley. here's your bloomberg brief. yahaira: president trump fired the head of the federal election commission but does not plan to leave. in a post on x, ellen said there is a line to fire commissioners and this is not it. she was appointed to a six-year term and under law, federal commissioners can stay past their terms until a replacement is named. apple is getting ready to unveil a long-awaited overhaul of the low cost iphone se that is expected to be available next week and go on sale later this month. it will include apple intelligence and is expected to

be more expensive than the current se model which sells for $429. shohei ohtani's former interpreter has been sentenced to 57 months in prison for stealing $17 million from the baseball star and ordered to pay ohtani back and pay the irs. he blames a gambling addiction and had requested a shorter 18 month sentence. jonathan: that is how rich we need to be, so rich that you don't notice $17 million has gone missing. lisa: is that the metric now that we have? jonathan: absolutely. i'm buying ken griffin's dinosaur, those kind of fossils. lisa: if you were a kid -- jonathan: childhood dream. annmarie: my nephews looked at that and said i would like a dinosaur. lisa: go to space, by a dinosaur? some things don't change. jonathan: next, we talk dollar

strength. >> the strong dollar policy is completely intact. president trump reemphasized the importance of maintaining the dollar. jonathan: that dollar getting a little bit weaker. we will catch up in a bit. from new york, you are watching bloombergtv. ♪

jonathan: equity futures on the s&p still going towards a week of gains on the s&p 500 and the nasdaq going nowhere, and the russell small caps positive by not even .10%. the main event is later this morning at 8:30 eastern with the payrolls report around the corner. let's talk about bond markets. thank you, treasury secretary,

scott bessent made the point that him and the president of the united states are focused on the 10 year yield and not the rate at the federal reserve -- at the federal reserve. lisa: but they want to focus on was the mortgage rate, saying that would be the true tell and he pointed to the idea that the fed cut by 50 basis points and caused it to go up and that is the reason they are focused on that. jonathan: under surveillance, dollar strength. >> first of all, the strong dollar policy is completely intact with pre trump, and they were very happy at his new york speech and in august when he reemphasized that dollar reserve currency status. jonathan: the u.s. dollar poised to end the week a little bit weaker with uncertainty ahead of the payrolls report and 40 minutes. james foley wrote the political

news flow in the u.s. combined with 80's u.s. job that i really suggest plenty of scope for volatility in the usd crosses. a lot of it was trade related against the peso, a little bit against the euro, as well but we are both or all of the same page that the one to watch is the japanese yen, what is behind big move? jane: i could not agree more, the yen is by far the most distracting, and we have seen that it is related to the market, and taking another look at expectations and the bank of japan interest-rate policy, we have had a couple of speeches, which i really steered the market, they really need to be looking at. and it is the household wage numbers and in the japanese

demographic, and the market is feeling the bank of japan with more interest rate hikes coming, and for the japanese yen. lisa: do you expect volatility to be in pairs and not just driven by the fact the dollar will strengthen ad nauseam? i'm talking about this with the same light that the ecb may take a page from the bank of england and cut rates, even in the face of somewhat stickier inflation. jane: there is a lot of news floating elsewhere. when you mentioned the euro, we had pretty weak growth, we have political issues from france and germany, and it really is still fragmented in france and germany

, as well. that is not a great situation for europe. it is weak leadership at a time when trump is threatening the eu with tariffs, a difficult position and the impossibility from the euro and looking up politics in the u.s. jonathan: plenty of debate on the continent today about whether neutral rate might be, i'm not sure why we are still having a conversation about neutral at the ecb when they suggest that they have a real conversation about making an accommodation quickly. jane: we have had that conversation quite a while, and we know exactly what the neutral rate is. but one thing that the ecb does

is there is the possibility they could relate to the key, and that is what we have in europe, and that will potentially be a break on some expectations. jonathan: appreciate your time. big news over the past month and dollar yen. i would like to turn back to the u.s., we are having a conversation about the sequencing of policy changes that mattered, and we are getting an idea, leading first with trade, shifting toward taxes. if we started with taxes and moved aggressively, we would have a different conversation about rates, where the dollars will be, but because we started with trade, the conversation drifted. i would say it is way too early in the year and far too early in the administration to draw

conclusions and extrapolate them out. if republicans start to get on site about what it could be, and where the focus will be, all of a sudden, we shift back to where we were at the end of 2024, running the economy hot, plenty of dollar strength and sucking all that capital in from the rest of the world. that conversation could shift quickly. lisa: right now, people are not seeing the forced to pursue a tax bill that could support that type of running the economy hot. the fact that we are having a discussion earlier about whether this would be a tax bill in 2025 or 2026 gives you an idea of the messiness that people foresee with them, it is much harder to pass through a bill, and it just highlights how much you are going to have these hot potatoes that might not make a huge difference on the budget deficit side of things but that do make

a huge difference with respect to people's emotions. lisa: early november -- jonathan: early november, emotions were around a tax bill, one big beautiful bill, and here we are talking about drifting into 2026, and the point was made that there were too many reasons behind the residence of the united states, too much emphasis to not get this done in 2025. lisa: this is true, the longer it drags out, the more we talk about uncertainty and even if policy is not great, companies would like uncertainty more than anything else. jonathan: the conversation shifts back to the data. joining us, nadia lowell, michael collins, torsten slok, the next hour of bloomberg "surveillance" is up next. ♪

>> the most important is the labor market. >> data has overstated the health of the labor market. >> we would not expect labor rate to go up with the tariffs against canada and mexico are sustained. >> going forward you will see a

payroll impact estimate, but it will be harder to figure out how that happens. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: the jobs report to 30 minutes away, 8:30 eastern drops, the estimate, the number we are looking for, 175, the high at the moment, 240, the low, 105. equity futures unchanged on the s&p 500. on the nasdaq and russell, positive by points 20%. lisa: it is really shocking to think about how far we have come from the last jobs market report when people are worried or concerned that maybe we have a re-exhilaration and maybe we were running this economy too hot, that has been taken out. this is a market that is hurting for evidence of crafts and the labor market to undermine the

american exceptionalism story, barring that, it might not make a dent. annmarie: you are right, we need to look at the bond market because that will be the regulated force on policies that this demonstration would like to enact, and when it comes to tax policy, there is uncertainty of tariffs. we have some of the bad news, you could see the good news, so the reaction to the markets will be more interesting. jonathan: caroline lovett came out with a long list outside the white house yesterday, the president's tax plan to end taxes on tips and over time, new cuts for american products, and expand estate and local tax deduction, and the list goes on and on. lisa: there are things that potentially could be offset some of the rest of them are saying, you get a tax cut, you get a tax cut, and how much gets passed know how much does that do to the budget deficit and does the

tenure respond in a significant way? annmarie: and i love the carriage loophole, the democrats could not do it when they had power and somebody writes it, also to do an interview, steve schwarzman and the elimination chatter will be over. jonathan: for the president of the united states, members of congress? they will face midterms. if they don't get something done on taxes, there will be big pressure. these were big campaign promises from the president and well supported. annmarie: big campaign promises and everybody thought that the idea of no taxes would go away after the election has been brought up constantly. this will be in the bill if he is the driving force behind it. jonathan: economic data this week is softer than expected, with jobs openings, then it went to the isf services, and still an expansion term and i don't think there's anything to worry about here. jobless claims softer but the heat comes out of the american economy, how long before it comes back in and we talk about

rate hikes again? torsten slok said the last rate cut was in december, and the number of months away from the next has historically been as low as seven months, implying the fed could hike rates in june. lisa: what would it take for them to do that? most of them are leaning to the diverse side of cutting. we did get some lori logan speak talking about maybe we are on neutral but what kind of policy would have to come through for the fed to really put a hike on the table and what kind of runaway and longer-term yields would you have to see where it would have to be politically feasible for them to hike rates? jonathan: i'm not sure any kind of number. lisa: if we get 600,000, they will be all for hiking? it will be fiction. jonathan: we have the markets friday. lisa: but we can make it exciting. jonathan: you should try harder. what a job you are doing so far

this morning. coming up, nadia lovell, torsten slok, counting you down to the latest payrolls report at 8:30, and nadia lovell writing the emphasized importance of diversification and hedging strategies to navigate policy uncertainty. nadia, good morning. before we get to policy uncertainty, let's talk about payrolls, what are you looking for in 25 minutes? nadia: probably closer to 200 k, but as we have all noted, this might not have any indication of the market. i think that even though there has been credence, that is more indicative of where the job market is, and nothing is falling off of the cliff, so we will see. jonathan: so that repeated to some extent in jobless claims, as well.

what kind of economy is this inheriting in 2025? nadia: you saw fourth-quarter gdp and the job market again, as we know, and despite all the tariffs we saw earlier this week, ism manufacturing finally back in expansion territory, and we have three months of new order, so that was missed to show the fact that you pushed out to see some recovery on the manufactured side of the economy, so, overall, it seems to be underfunded. lisa: which is the reason why you came in, and i will steal some of your thunder, you talked about the capital expenditure investment that big tech names are coming up with, 100 billion dollars, 75 billion dollars, where's that money going? are we going to see that giving some jobs boost or a manufacturing boost to rest of the economy? nadia: you are seeing that.

i mean, before we looked for 25%, and now we are looking for 35% plus, and that is over $300 billion. we think that will benefit the data centers with a layer of the ai story, which we think is disconnected with the pressure we've seen the last week, especially with deepseek, so the fact that hyper-scalars are spending more should mean a lift for things like semis in terms of earnings. lisa: do you think it is the same mistake that this market is more focused on possibility of >> in the labor market than the idea of a re-exhilaration like torsten slok talked about? nadia: we exhilaration as possible and i agree that the labor market or the economy itself is not seen a major crack and we have some concerns about inflation right now, and it seems to be coming down. we think it will come back down again, and we don't expect the

economy to overheat. i think right now, companies are sort of in a wait and see road to see where policy eventually shakes out, particularly government policy. annmarie: when it comes to policy, you say you are expecting aggressive collective. explain. nadia: we are expecting selective tariffs, not universal, and what we are looking for is lifting the effective tariff rate for some be like china, we think that will chip close to 30%. we think that the president will continue to negotiate with like canada and mexico, where we see that grace period has been given to the two countries, and we are not expecting significant tariffs against canada and mexico to really stick, it is just complicated, the complexity forcing them and particularly something like autos. annmarie: and we already have

trade agreements with these two, with more coming up, so maybe this is an opening solve to the conversations. the president says they will visit the european union next, what are you expecting? nadia: they do expect increasing in europe but china will be the focus. we are watching the april 1 deadline, we know the president has asked federal agencies to come back and countries that have major trade deficits with. a lot of those countries are really in asia. annmarie: christine lagarde talked about peak pessimism, would you want to be exposed to european equities? nadia: we actually have a call on germany for a tactical call around that that we put in place back in december. ahead of the german election and a couple of weeks, also, you could get some sort of peace agreement between ukraine and

russia. that still remains to be seen, and you also have this election where a lot of the candidates have a policy, and as i noted earlier, germany has a lot of exposure to production with manufacturing starting to pick up, even companies suggested in terms of the inventory cycle, as well. that could be beneficial to germany. jonathan: that is quite a call, euro stoxx 50 is up by more than nine, would you close that if it is tactical? nadia: we will see what happens after the election, but we are thinking three. to four months jonathan: we are to 10% upside when you initiated it? nadia: no, it is coming in better than we thought. but we will take it. lisa: i would like to go back at something discussed that is on

the money going into the european market, all the flows, and the biggest trend has been the dollar-yen and the fact that suddenly after years and years of money moving from east to west, we are starting to see a shift, and that will lead to an outperformance the rest of the world, and do you believe this is the beginning of something when it is taken and that type of way? nadia: no, we continue to think the u.s. will outperform and there will be pockets in which other regions will outperform like the dax, and what we ultimately think fundamentally without exposure to tech particularly in the spending happening there, the ai story that remains in the ecosystem, not only tech but industrials, as of as utility companies needed, we think u.s. stands to benefit. lisa: a lot of people wondered if the utilities play was done because of concerns and the idea that it would be less energy intensive. you pushed back against that

anything that's the wrong take, why? nadia: look at it, last we saw some of the independent power companies down as much as 30%, they are not down so much anymore, so that correction has been bought right away because it does not change the dynamics that there is an increased need and it is not just about ai, it is the energy transition, cloud computing, and there is all of this technology that is going to be needed and increased powers is quiet, so we continue to advise our clients when you see that disconnect in the market, that is an opportunity, despite the fact that we get volatilities and you have to use those opportunities to get into things like utilities and independent power companies. jonathan: love doing this with you every first friday of the month. job numbers are at 8:30 eastern just got a message, eggs secured over at whole foods. just managed to get some.

just got a confirmation. lisa: how many? jonathan: a dozen. lisa: how much? jonathan: i got the price and can share it in commercial. lisa: this is what we talked about today with the idea of somebody stealing the eggs from the truck and then offering them to you on canal street, basically getting people pitching you, the eggs are secured. jonathan: are we on canal street this morning? selling the gucci backpacks. yeah right. let's get you an update on stories elsewhere. here is your bloomberg brief. yahaira: we start with president trump's tax priorities, which you discussed earlier, outlining what they were in a meeting yesterday with republican lawmakers. he called for the end of the carried interest tax break and would like to cut special breaks for tax owners. meanwhile, the israel defense forces says it's air force conducted a strike in lebanese

territory on two military sites. they see the sites contained hezbollah weapons, which is a violation of the cease-fire agreement. and a plane carrying 10 people went missing in alaska thursday during bad weather. the flight is likely the third deadly aviation disaster in the u.s. in just two weeks. the associated press reporting that rescue crews are scouring the ground for any sign of a wreckage of the says netjets. that is jonathan: your bloomberg brief. jonathan:that is tough to hear. next on the program we catch up with michael collins, pgi am fixed income. the payrolls reported 60 minutes away. from new york, you are watching bloombergtv. ♪ -- the payroll report 16 minutes away. from new york, you are watching bloombergtv. ♪

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jonathan: the jobs report is your teen minutes away and then the cash open, dictating the price of things will be the cash report because right now the market is going nowhere. equity futures unchanged and we are going nowhere in the bond market, the 10 year, 4.4383. bramo is hyped up. lisa: there is a tell that people are paralyzed and have nothing to say about nonfarm payrolls. it has a different tone to it because there has been an exhausting running in place where you are trying to play whack-a-mole with different proposals. and then they all get disrupted the next two seconds, so if we get a headline number, we heard 15 people tell us it is fictitious because people will

explain it away and it becomes hard to begin to know where to look. jonathan: payrolls are not new, ok. they have been around for years, not new. i think what is new and why we are taking even less emphasis away from the report is the policy changes expected from the administration. policy is paramount, and also the federal reserve has to take a backseat so i think it is policy, policy, policy and donald trump, the president. lisa: you add that they will advise it by almost one million jobs, the fact that these numbers have gotten messy because you have not gotten the same kind of response rate, it makes it dizzying. jonathan: and that they were inflated for political ways, and they denied us. i'm not saying it's fine but i'm saying that industry exists. lisa: there is an industry for everything, including eggs. jonathan: of course. costar group cut the price target on amazon, citing slowing

revenue in their cloud division, down by 3%. second call from citi, downgrading nike to neutral, but shooting a lack of new products, and morgan stanley downgraded elf, by mentioning weakness and volatility in the space. they are getting hammered, down by 25%. let's turn to the labor market, january payrolls moments away. expecting 175,000 jobs, and unemployment to hold steady at 1.4%. joining us now is mike collins. welcome to the program. good to see you. what are you looking for in 11 minutes? mike: i have no idea. it is a total crapshoot. to your point earlier, i think the markets are taking it with a grain of salt are you there are so many big revisions that will be associated with this, and these jobs numbers when we get them, first round of every

month, they are backward looking and then they do get revised, as well, going forward, so it is about where the economy is going, where the labor market is going and where inflation and interest rates are going over the next six to 12 months. we had a big retracing of rates, and it feels we are getting closer to the high end of fair value. lisa: i was hoping you would come out and say this will be an important jobs report. i'm looking forward to it and have so much to say about it. i think there is something telling about where markets are positioned. priya misra said it seems there is an asymmetrical market to respond to the downside surprise rather than upside, putting away the noise around these numbers, do you agree that right now this is a market that feels like there is not a risk of overheating but there is a risk of cracks forming in the labor

market? mike: i'm in the asymmetric camp with priya, as well, and it is a function of what is priced in. right now, there are two fed rate cuts priced in, sometime the next 12 months, and that is it for the next 10 years, so there is very little movement to the upside here and risk. you can trace back to that 480, getting to the 4.5 to five zone on the 10 year treasury. i call that the overshoot territory, eight zone where rates are too high and unsustainable. i think 3.5 to 4.5 is the big fair value range on a long-term 10-year treasury yield, and, personally, i think they will spend in the bottom half of the range from 3.5 to four, so we have overshot a couple of times the last few years, and it is not stay up there for too long. now even close to 4.5, rates are

clearly in the buy zone. if there is a downside surprise in the labor market, growth and inflation, geopolitical risk, policy risk, i mean those two cuts that are priced in could turn into eight or 10 pretty quickly because that is the kind of drive power the fed has. they could cut 200 basis points overnight if there was a real disaster and get to a rate that they would probably think of as being long-term or neutral, so that is dry powder and that is where asymmetry comes in. lisa: i know you are bullish on longer-term bonds and have been for a bit, how much more conviction did you get that you had the president of the usa he thought the fed made the right decision and you heard scott bessent come out and say he is much more focused on the 10 year yield than job owning the fed in one direction or the other? mike: i think that is good news they backing off the federal reserve, that is what they are supposed to do, let them be

independent and do their jobs. that is encouraging from a financial system standpoint, and it is really good for the long-term path of the economy and inflation. in terms of the 10-year, if i had all of the debt the government has, and trump knows that as well as anybody, i would want lower interest rates, too. i think these rates are unsustainable, look at the deficits and debt load we have and the level of interest rate we are paying. it is that multiplication and factor in that service we have to pay every day, month and quarter, and we are doing 125 building -- billion and it is just nonstop. at some point, something has to give, either that that tested come down or the interest rate has to come down, and we all know which one is the variable that is the one to move the most. at some point, i don't know if it is next month or 10 years, at some point the level of interest

rates will be lower, and you have seen that in other countries with a lot of debt, like japan is raising a little bit, but are yields are almost four times that and in china, almost three times, and they have been cutting because high debt levels cannot be sustained by interest rates, and in an economy where growth is moderating. annmarie: that is music to the presidency in, good morning, mr. president. if you can get policy certainty today because you don't really care about the jobs report, of all the ideas floating around washington, d.c., what would it be? mike: i mean any certainty is better than uncertain. the markets we know from uncertainty, some blend of higher revenues coming in, whether it is tariffs or greater growth, through deregulation, and just better corporate earnings through tax cuts, etc., you have to balance those and

trump understands that it is a balancing act. the whole some of it has to be lower budget deficits. i would love to see a balanced budget. the problem is to get there quickly is almost recessionary. to cut as many expenses at the government level, you have seen these pretty high-paying jobs that are being eliminated, and it will hit the economy. and you are already seeing the combination of tariffs potentially, immigration reform, etc., it could result in higher inflation and lower growth. that is a brutal combination, kind of what the u.k. is going through right now and that is why the bank of england is painted into the corner a little bit because that inflation risk is brutal. nobody would like that because that is where the fed gets stuck and cannot support the economy because inflation is sticking and nobody would like that. it is a tough valance enact and

i would not want to be in trump shoes. jonathan: two seconds, give me a number, the estimate is 175. mike: i have no idea, i will take the under. jonathan: we had yesterday ubs calling it an exercise a noise, and we just heard from mike collins, who called it a crapshoot. lisa: why are you asking me these questions? jonathan: from new york city, this is bloomberg. ♪

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♪ jonathan: following days of breathless promotion, here it is. ridiculous. the jobs report drops in about 20 seconds. the nasdaq down 10%. the bond markets look like this. the 10-year yield at the moment just about unchanged at the moment. the jobs report, the estimate 175. good morning, michael mckee. mike: good morning craig last month -- good morning. last month was revised up. the unemployment rate goes down by .1%. we have revisions to the

household survey. we will have to see if that figures into it. it is still showing a tight labor market. the change in nonfarm payrolls, you have to add to that 100,000 more in terms of revisions to november and december. the private payrolls go up by 111,000. manufacturing payrolls up by 3000. adp said we lost 13,000 jobs. average hourly earnings extremely strong, up .5% last month. the forecast was 4.3%. that pushes the average hourly earnings year over year up. the unemployment rate, 4%. labor force participation rate goes up a tick, 62.6, all of this to suggest maybe what we have seen is the biden administration go out on a high

note. it will be interesting to see what the current white house says about all of this. in terms of revisions, payroll for november revised up by 49,000, december by 51,000. that is how we get the 100,000 total. a quick look at revisions. 511,000 below what we had for the year prior to this. that is over all of the months. they divided out over the months of the past year. we do get some negative numbers i believe. no, not even october. october, we go up. some thoughts that might be negative. in terms of population controls, population changes, to me 871,000 -- 2,871,000.

that is much lower than they already thought. your difference is 176,000. those revisions meaningless to the fed. it will get some political talk. hiring a little weaker but unemployment 4.0%. jonathan: thank you. first look, a tug-of-war between a downside surprise on the headline number and the wage report. average hourly earnings coming in as 0.5%. the headline payrolls number 143, the estimate 175. who is winning in the tug-of-war? wages up. yields higher by four or five basis points. the 10 year is up driving dollar strength. in the equity market, we are back in touch but not much, down

.2%. not too much drama but certainly in the early part of the read it has put more emphasis on wages. lisa: other than the headline number, it is screamingly bullish and hawkish. the unemployment rate fell to 4% from 4.1%. this is going in the right direction for a fully employed america. the wrong direction if you are counting on the fed to cut rates. the labor force participation rate went up. all of these numbers point to the idea people are coming back into the workforce, unemployment is down, wages are increasing. the problem is the headline number tends to be messy. jonathan: softer than expected. mike: joins us. downside surprise but wages coming hotter. how would you frame this report? mike: i think it is another sign

the economy continues to be resilient. it has been a strong economy. we just had a four-year gdp boom like we have not seen since just after world war ii. we have had this post-pandemic boom. nominal gdp is up which is remarkable. you're seeing a continuation with wages continuing to be sticky. growth continuing to be robust. hours worked are down. if you multiply wages by hours worked, that is how you calculate consumer income. for the whole economy, it is probably a little bit weaker. the headline numbers are moving all over the place, a lot of revisions and some to come. it is another sign the economy continues to do well. the stock market reaction. is a little. negative i think that is a sign that higher rates, good news in

the economy, less likelihood to cut. risk assets can only do better from here if you have a moderation in the level of interest rates. it adds too much pressure to the overall economy. lisa: are you saying you disagree with lorie logan that it is still restrictive and as long as we stay in this area, you will see the ongoing grind weaker in the economy? mike: i agree in that the fed is on hold. they are totally on hold right now. they are on ice. they may not move this year. there is a high probability. what lori said is focused on the current environment. the fed is more likely to sit on their hands. lori and powell agree over the long-term rates are meaningfully restrictive. , easily 100 basis points too high.

that is the path of least resistance, but maybe not this year. jonathan: mike hollins of pgm. lots of attention on the earnings side of the picture coming in hotter than expected. the first move not necessarily the right move. the 10-year yield is higher by two basis points. the 10 year higher by three. i am not sure this data will constrain them one way or the other. if you are an investor looking at this, things are still ok based on the court. -- this report. lisa: things might be less ok if you are a stock investor with some of them depending on it going lower. jonathan: good morning.

you've had a few minutes to go over this one. what is your first take? >> the framework the fed uses to evaluate is the taylor rule. it has two variables, unemployment and inflation. both components are pointing at the fed at least staying on hold. this is not enough to consider hiking. the tailwinds to growth continue strong. we have strong defense spending, strong tailwinds from the chips act and all things supporting the u.s. consumer. if we do get lower taxes on social security, over, tips, this will be a tailwind to the outlook. it is not clear the fed is done. i think they will be keeping them on hold still open to hikes coming this year.

jonathan: implied in the outlook and communication is a revision of interest rates. i understand the bar to cut has gotten higher. but is it a lot higher? >> since the election, we have seen the animal spirits increase significantly. capex plans have started to re-accelerate. we have seen strong improvements on sentiment indicators pointing to a chance that there is a feeling we should begin to hire and spend more in terms of capex. it is true where we sit today, the expectation is inflation will come down. we are not near the target on the trend. with the an employment rate falling and wage growth higher, those are important indicators

for the fed when they think about what they want to do. lisa: a lot of indicators do not show the same heat. a lot of it has to do with the hours worked coming down. when you do the multiplication, that is what ends up happening. are you seeing other signs of inflation picking back up, other than eggs, that could be sustainable in an economy increasingly concerned about deflationary impacts? >> some indicators are ism services have jumped higher. average selling prices have gone higher. the labor market is looking hotter. there are indicators that suggest it is not clear the narrative is we are in a territory where monetary policy is restricted. if it was so restrictive, why is the unemployment rate going down? there are a lot of conversations

around if it is the case we are in restrictive territory. there still decisions to come on tariffs and immigration and tailwinds to fiscal policy. lisa: if it is true the fed could hike rates and policy not restrictive, does it make sense stocks would fall if benchmark rates stay the same or the prospect of rate cuts is taken off the table? >> the main reason stocks are falling its 40% of the index is 10 stocks with the magnificent seven. they have such a big weight and are so sensitive to interest rates. if rates are higher for longer, the magnificent seven will potentially trade lower. an important answer to your question is the tech companies make up such a big share of the index, so that is why we have seen some broadening out away from them. the difference in performance is the tech stocks and the s&p 493 continues to be important.

lisa: you talk about tailwinds potentially from policy, but how much do you think trump is willing to expand the deficit? >> the committee for responsible federal budget found it would increase spending over the next decade. it all depends on what comes through and we will over the next six months have a lot of discussions over the debt ceiling in june. let's see where it goes in terms of what the impacts will be paid what came out yesterday did not put in the direction of conservativism and instead pointed to tailwinds to growth. jonathan: the jobs report came in with a headline surprise. upside surprise on average hourly earnings month over month coming in at 0.5%. the estimate 0.3%.

unemployment dropping back to 4%. the unemployment scare of the summer is over. the federal reserve was nervous about that and delivered 100 basis points of rate cuts to close out last year. now we are firmly on pause. we have been talking about revisions for 2024. the average monthly gain has been revived to 166 from 186. some are looking for something weaker. lisa: which is why people are saying we were expecting last year to have less strength and it was pretty strong. it goes to undermine the fear at the end of last year that caused the rate cuts by the federal reserve and raises questions. is this really a market so susceptible to cracks forming if there is a policy that creates a good deal of uncertainty? jonathan: jeff rosenberg of blackrock joins us. what is your big take? >> i think the big take is

january is a difficult month. there are a lot of moving parts. it is a strong labor market. probably the most interesting thing is the last thing you said, that they may benchmark revisions per the market having expected bigger validation of the story the labor market is overstated in terms of the overstatement was not as overstated as people thought so maybe that is pushing up on the rate reaction. it is a mixed report. the unemployment rate ticking down, that is on the strong side. the headline number is disappointing given the seasonal expectation that would give it a seasonal boost. i think you talked about the

asymmetry to the fed. it will take a strong report and unlikely to come out of the labor report but really and inflation report to push the fed off of the cutting expectations. a weakening side, the fed will be quick to cut. i do not think this changes the outlook. we are still on pause through the first half of the year. a lot more data will be necessary for the fed to accelerate the pace of cutting as they were clear in highlighting they are in no hurry to cut. >> you talk about the asymmetry in the fed's reaction function, is there an asymmetry in investors that needs to be rethought, that people believed this was an economy starting to show weakness which justified some rate cuts at the end of last year, that maybe that did not exist?

maybe we actually had a much stronger labor market than people expected and this is a market that is more susceptible to overheating. >> that is the change. we had the fear on the labor market late summer/fall last year. that has been replaced by a debate. you started to get into it earlier, around, are we that tight given how strong the labor markets are? maybe the fed does not have to move as far and may be neutral is higher than we thought. because of the strength of the labor markets and the strength in the economy and the halting progress we are making on disinflation. that is the summation of the change that has pushed us away from the fed is going to push us into recession, the big increases in interest rates, much more towards what i keep saying on this program, the fed is ignoring the role of financial conditions an

incredible wealth creation coming out of the mag seven wealth effect leading to much looser financial conditions then you would expect given the interest rate structure. that is really the issue. financial conditions have not been transmitting into the real economy type policy. -- type policy -- tight policy. it is the financial condition through which monetary policy transmits. we are much less interest rate sensitive and more confidence sensitive driven by financial conditions. lisa: would you fade the valley in the 10-year treasury yields? >> it is interesting. you talk about the 10 year treasury yield rally. here, we are talking about fed

policy. there is a disconnect between talking about rates on the short end, what the fed is going to control, what the markets are going to react to with respect to the fed and what is going on on the long end. what is going on on the long and will be much more affected by things like fed premium and uncertainty and the fiscal policy outlook. i think we have gotten to a level of term premium normalized part way. you've got a lot better in terms of the term premium and that has raised the attractiveness of the 10 year relative to the two-year. i think what you will be looking for is the debate around the next policy, a lot of focus on trade and tariffs. we will turn that into taxis and fiscal and that will weigh on where the 10 year and term premium settles. jonathan: that is how you dance

around a pointed question. i appreciate it very much. cpi on wednesday. also, you will hear from the chairman of the federal reserve testify in front of the house. lisa: that could be more important than the number of the morning causing people to rethink where we were. if you see an upside surprise, does that become a move that unwinds what we have seen over the last month? jonathan: reaction from the white house about 15 minutes away. we will hear from kevin hassett. look for that conversation in a moment. let's get an update on stories elsewhere. >> recapping the payables report, the u.s. economy added 143,000 jobs in january. the survey had been calling for 175,000. unemployment fell to 4%. average hourly earnings rows .2%

from a month ago to .5%. president trump has tasked his vice president was overseeing the future of tiktok in the u.s.. jd vance will work with the national security advisor. trump issued an executive order giving tiktok an extension to find a buyer in the u.s. or face a ban. the kansas city chiefs are looking for the third straight super bowl title. the chiefs will take on the philadelphia eagles in super bowl lix on sunday. president trump is set to become the first sitting president to attend the game in person. he posted on truth social this morning saying two great quarterbacks in the game, also an unbelievable running back, and the best tight end in football ever. he sounds excited. jonathan: thanks. next, we set you up for the day ahead and sneak peek next week.

we count you down to the director with kevin hassett joining us in about 10 minutes time. ♪

joumanna: the equity -- jonathan: the equity market is unchanged. your trading diary looks like this. this afternoon, president trump meeting with the japanese prime minister. tuesday, we will hear from jay powell testifying before the senate. you'll hear him testify before the house as well next week. wednesday morning will be dominated by the cpi report. thursday, another round of jobless claims. friday, the retail sales report.

in about five minutes, you will see kevin hassett joining the program first right here on "bloomberg surveillance." i think we all have the same question. what would you ask kevin hassett in five minutes? >> ask the view on fiscal policy going forward and what tariffs might mean for the outlook. jonathan: and how complicated life might get if we cannot get the tax cuts from this congress. lisa: does this administration have more room to take their time if this is an economy with plenty of heat behind it so it is not at risk of cracking? >> i like what he said at the top of the show, what is the pain threshold for the policies? the 10-year yield, scott bessent said donald trump is so focused on that this time around, how high can it get? jonathan: you think we will

get a yields market around 525? >> you think that is what he is going to say? i am sorry, kevin hassett cannot join us. [laughter] jonathan: kevin hassett just around the corner. the jobs report came out about 25 minutes ago. 143 the headline number. the estimate was 175. details harder than expected, particularly earnings. wage growth coming in at .5%. the equity market unchanged. the opening bell 34 minutes away. kevin hassett live from the white house next. ♪

♪ jonathan: welcome back to the program. the opening bell 30 minutes away. equity futures just about unchanged. the nasdaq a similar move. the jobs report out moments ago, d-lines surprise on the headline number, 143. the estimate, 175. with more details, let's crossover to mike mckee. mike: the unemployment rate comes in at 4%. that is one of the key numbers. it is impossible to