fund managers and analysts that were up here. they were all smiles at dinner last night, but when you asked them their opinions in the survey, they're practically suicidal. let me just give you a piece of it now and we'll give you a piece of at it 7:00. we asked them just what you guys were talking about here, where is the unemployment rate going to be a year from now? two-thirds saying it's going to be above 10% and about a third right there saying below 10%. what is the most important thing to change or to improve for the recovery? 39% say job growth. so that is why we're making such a big deal about this report today, because it's part of the whole story of the economy turning around. 26% say higher consumer spending and a smaller fraction saying it's the banks, more credit. finally, when should the fed starts raising rates? about 60% say they will be on hold or should be on hold for longer than a year.

22% saying they will raise rates in the next 6 to 12 months. finally, we asked them to give the president's handling of the economy a grade. perhaps you might imagine, they are very down beat on the president and his economy. he gets about a d. and that was a middle d, a 1.4, 1.5 if you average it out. they're going to come back and tell you how long the recession lasts. and we'll ask one other bonus question, what letter they will give as to the shape. it's interesting what they tell us. >> i was very -- macaulay is here. two bs, the rest were c, did say and one guy even game president obama an e.

>> is that between a d and an f? >> a d is a pass? >> a c is a pass. >> and i've had -- if you get a d, that's a pass. >> on a straight pass/fail, though, you haveget a c. >> no, i didn't. i took one course pass fail and i would have gotten a d if i hadn't. >> joe, if you want to aim low like that, go ahead. i don't aim low. >> steve, what's their biggest complaint with his handling of the economy? >> one guy said he overpromised. other guys say it's not really up to him and it's other people who are managing the economy and he's not really in charge. others says he's not engaged in the things he that matter for the economy suspect the. >> a "d" is -- >> becky got b in her whole

life. >> tooven, the whether the last year was sun yee, right? >> yeah. >> so maybe you guys can get joet doors this week, if you know what i mean. >> we'll talk about that at 7:00. here is what i want to tell you. there are a bunch of rooms in each cabin. only a couple guys have to double up in a single bed, only a couple economists. >> the guys that are in sync on their economic views. >> they have the same view. >> and i'm sure it's head to toe and probably in the nooets sheets -- >> no short sheeting. that's cruel. >> hey, that is nice. is that a cabin? >> that's one of the cabins right there, yes. >> wow, that is a very cool place. man, that makes me want to take the kids up.

yeah, that's cool. beautiful. >> this is not one of those over the top places. it's really coming back. it's comfortable, but it's not over the top as far as luxury goes. people feel comfortable coming here and a lot of these guys, they manage a lot of money. they're going to push by dfish shop by night. i didn't see any alcohol on the table that's full of wine and scotch. >> because it was all consumed. >> he brought us pictures from all the wine from last year. >> we'll get you some pictures in the next hour about the table. a lot of this is kotock and he's a bit of a wine maven and he brought some cool wine up here. >> how many people are there. >> versus bloggers.

>> 24s ka. even if they blog, they can manage that. >> steve, teal be to you to you all morning long. but in advance of today's jobs report, president obama making a bullish call on the economy, as well. he was speaking at a democratic campaign for the democrat governor of virginia. >> i'm convinced that the actions we've taken in the first six moss have helped stop our economic free fall. we're losing jobs at half the rate we were at the gyming of this year. our financial system is no longer on the verge of collapse. the market is up. housing prices are up for the first time in nearly three years. so we may just be seeing the very beginning of the end of

this recession. >> the president is scheduled to deliver remarks on the economy this afternoon, shortly after 1:00 eastern time. >> all right. let's check on the markets this morning. another one of those days yesterday ended up with paring its losses and a very manageable 30 points or so. today, take the 13 minus the 26. people will be hesitant to do anything until 8:30. i would be -- i would be hesitate to go to the bathroom before 8:30. i'm hesitant to do anything before 8:30 today. >> really? aren't you? >> to speak so people at home should be saying, look, martha, the job on -- >> would be. if it continues on the plane,

you're going to see -- >> it would be nice to pick up. >> some say that the market, the rally is so resilient, that he could with stand another hot number like minus 270 been 280. what is disappointing is the question this morning. >> i don't know. it would still be less than it was in june. do you want to go on, more board? >> if you want me to, i would do that. i was just going to sit here until 8:30. did you hear what i said? i wasn't going to do anything until 8:30. >> and you meant it. >> and i meant it. i was going to crack over the post. give me a great $1 hup. suggesting that it makes oiled look like a bible been you don't always have one machine to make

motor vehicle in poepts not the only game left in town. let's look at the ten year. that is something that we can see affect go ahead by today's number. that's at 3.72%. it was down over 3.5% after pushing had%. the dollar is definitely problematic. it's been orderly so far, but we were at 1.44 at one point on the euro. we aren't watching the yen as much as we were. >> but yesterday, the dollar spiked up averagely. but tlipgs things got keepd of we're. if you're sigh signed ooh stanlz -- >> a time of their growth goth from a aeker rur up.

>> what about gold? >> moderated and now $961.. it's a little bit above the mid point, you would think. but is that going to 1,000 or back below 900? >> it's tried five times already. >> if it goes above 1,000, the one thing is we bring out the prospector, right? >> that's true. save it. wait. >> it may not get to 1,000. >> we'll run it. >> like i said, wife got nothing else to do before 8:30. >> okay. we promise, we'll run it. let's get overseas, county of all kbed with bts bts is awaiting this kwob option with geoff cutmore. >> we are in the red and we have

been pretty much since the markets opened. it hasn't helped that we've had bank numbers through from rbs. this is a uk bank pretty much owned by the government at this stage. first half net loss of 1 billion pounds and they say they see a tough two years to come. that's taken the stock index for the banks down sharply. the only one that's in positive sectors right now in europe is the telecoms. allianz came in with numbers better than expected. outside of the financials, you had some news from the sports shoemaker puma. and about the best that they could manage is it's a challenging market for the second had a. well, thanks a lot for that, guys. we are treading in the red right now until you can give us something better on the barrels number. let me sent it over in sick for

for more. >> investors here are posting for the crucial jobs reports. the 225 edging ohioer. in china, the shanghai xos yet tanked 2.9% in that much of the easy number is coming from there. the hong kong market, down 2.5%. australia slipped 0.6%. the central bank today raised its interest rates. that's it from asia. handing it back to you, joe. >> thanks, christine.

see you later. sorry. we're weighing how far to go. now for an early check on the u.s. markets, joining us now, david tice, nariman is here, as well. let me get a quick read on how you feel about the jobs number today and what it's going to show. >> we're a little more pessimistic than the consensus. we think maybe 330,000 job lowses, but this is a much better improvement than in january. this is less than half that. so this is going to be a better number. it's not going to be a great number, let's be honest, but a better number than we've seen in a while. >> a lot of people say let's be honest. we don't need that caveat around here, nariman. we've always honest around here. when does the recession ends? >> from a gdp number, it's already ended. it's done, basically.

it's over. >> really over. and the recovery will be what letter, l, u, w, what? u, i think. i put a vote in for u. >> all right. we could do worse than that opinion it's better than an l and definitely better than a w. >> daefd, you must think this rally has no underpinningss whatsoever. >> well, joe, we would like to see prosperity return again. we criticize the economics that put us in this position. unfortunately, we think a lot more jobs are going to be lost. we think that the numbers that are out there with this optimism are too low. charlie bitterman at trim tabs has been talking about a negative 488,000 job numbers. we think that is possibly in the cards. >> well?

good times or bad times, yuft always a present pear. since 2,000, the market has been down. >> if we ever shake everything out and let's say we get to a point like 1982, some people think we're halfway through a multi year bear market. will you ever have the prudent bull fund? >> it's very possible we could do something like that. i'd love to at least be personally bullish again. unfortunately, we have a lot of ground to go through in the future until we get to that level. >> you look at fiscal policy, monetary policy. you're not seeing a lot of fundamentals back up the positive side in terms of

government policy? >> no, we're really not. and i'd like to steer people to tom woods' what has been marked for identification website. he's from the austrian institute of knowledge. he's written a book called "meltdown." and the really outlines some of the keysian thinking. >> are you blaming the fed, too? >> actually, when he started the fund, he criticized me back in 1996. greenspan was right about his ex u.n. ub rans comment way back when. and you have kids, you talk to your kid's cell phone. you have to take their cell phone or car away. >> no, no. >> unfortunately greenspan never did that. >> everybody criticized you. we don't criticize. we just ask to ask you questions so that you can bolster your

case. would you say i'm criticizing you today? >> no, newer not at all. >> mayorman, you've been wrong so often that -- no, i'm kidding. nariman, from here on out, what's the third quarter? 2%, 3%, and what's 2010? >> the third quarter is probably going to be around a couple of tenths. we're saying poch 0.5 mers. next quart we shall quartzer, 1.5%. not a lot of people are focused on protectivedy. our estimates are the second quarter productivity numbers will be released next week. 4% to 6% up. that's what's behind this earnings northbound shah effort

is ticked off. >> that's part of it. but it's a good news -- bad news story. the bad news is we're shedding jobs. the good news is it's tremendous. we've never seen anything like this in a recession, ever. >> who is going to want to work when 60 cents goes back to the government? >> believe me, u.s. companies will figure a way to do that. they always have. >> u.s. companies, but what about, you know, the companies that pay their employees? >> well, i mean, it was an issue. we had job loss recovery, jobless recoveries. it's going to be something like that again. that's not necessarily bad news when you think about the sxakzs we got after those slow jennings. >> david, we've got to go. what's the most overbought sector of the stock market, do you think? >> i think cyclicals, possibly, joe, or technology. there's still a lot of cyclelty in tech and there's so much --

oh, financial socks that have gone up the most that tlip short squeezed dps. some of those stocks have doubled and we think they're going to run to lows the. >> lows science. >> yes. >> happy friday, good to see you. carl, would you please honest reading this? >> hock. i will. as you may annoy, long is refuelling the grass program with another $200 billion. first let's look at yesterday's winners losers.

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welcome back. the senate passing a $2 billion stangz for that cash for clunkers program. all the proposed amendments were rejected. the bill now goes to the president's desk and he steins

it into law. the president's initial $1 billion in funding is generated more than 920 million in rebates and more than 220,000 auto sales. it sounds like a lot, but just a tiny fraction on 10 billion. but in the end of it, it's getting that money out. big question out there, could banks soon start to change their compensation strategies so they start playing employees with assets? a 5 billion fund of toxic mortgages and bonds, granted, is a large portion of last year's bonuses was up 17% since january. that outperformed the major stock indices. the workers who got the fund are locked in for at least five years and credit suisse is not likely to repeat the program this year because it's shed many of its toxic assets. by the way, it's had two strong

quarters of earnings growth so far. it's official, the "new york times" has hired goldman to explore its media group, which includes the boston globe, and a worcester paper. >> i always want to pronounce it differently. >> reports suggest -- is it the new audio guy? >> yes. >> great timing. rim shots are for not funny jokes. >> yeah. the boo is for not funning shots. >> reports suggest -- >> that was pretty quick. >> late, too, though. we're back to talking about the "new york times." they're finally hiring goldman to -- let's be honest.

reports suggest at least two bids have been submit ted by a boston grown owner, a former globe executive member of the family that sold the globe to the times in 1993. coming up, we'll have more on this morning's top stories, plus steve leisman and his fishing forecasters predicting the payrolls report. we're going to check in in the futures pits in chicago. taking its rightful place in a long line of amazing performance machines. this is the new e-coupe. this is mercedes-benz.

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joining us this morning from gran lakes scheme, steve leisman and his host at this outing, david kotok. somebody described this as camp kotok. is that accurate? >> i think that's right. dame kotok, a guy we've known

for a while puts this together. set the scene for us. >> well, we've got 34 plus you and we've got numbers. the money management here is probably a trillion and a quarter in different forms. we have people from the persian gulf from vancouver from dallas to new york to maine. >> tell us what the money thinks right now about the outlook. >> well, you know, it was interesting. last year, you said it on the air just a few days ago. this group was really bleak and it turned out not bleak enough. >> not bleak enough. >> this year, it's a different mix. i think the question you put last night at the survey, is it a w or is it a v? >> with we're not giving it away. >> no clues only. we won't blow the cover. but the fact is, when you're in the first leg up in a w or you're in the up leg of a v, it looks the same. and that's exactly where we are.

so the group, i think, is divided, but you know, there's still this overriding sense of concern because it's a very slow job recovery that's ahead of us for years. policy is a big question here. how are you going to fund out all this debt? >> i know this group. i've known many of these people for years. i don't know them to be ideal lonelial or very political at all and yet they're giving obama a d. what do you think is behind that? >> because there's a claim taking place in washington that we came in and we fixed everything in a few months, look how smart we are, look at our policies. but as a practical matter, the spending side of the stimulus is still in front of us. the work was done, the heavy lifting was done by the federal reserve and you had a tremendous liquidity infusion and policies have been failures. >> can i stop you there, though? if you think it's a failure, we can talk about that, but in general, this group is probably more libber tearan than anything

else. and they probably oppose government intervention. do you think that's fair to say? >> i don't think so. i think we run the gamut here from left to right. we've got democrats and republicans and good fisherman and bad fisherman and they open up. the thing about a place like this is you have the networking conversation, not formal speeches, lots of good exchange of material. we are geopolitical views. george freedman is up here this year. it's terrific. >> how are you putting your money to work? how are you putting your money to work relative to your forecast? >> well, we are fully invested. we've been fully invested through the spring. so we had a wonderful ride. it's liquidity driven, which means you now have to say what are the fundamentals, how does this recovery take place and what is the policy and how is policy going to impact you? actually, you can now argue that the first infusion, the first half of the bull market, however

you want to characterize it is over. if you didn't get in, you're now in a problem as a portfolio manager, how are you going to chase this market? what are you going to look like to your clients if you're not in the market and you're scared if you get in it. so it's a very difficult issue. for us, we've been in it and it's been a good ride. >> david, thank you for inviting us. we're pleased to be here every year and we're looking forward to all the views. >> don't forget the fly fishing lessons. >> you're going to give me one? >> no. you're going to give me one. >> okay, folks, we'll see you back at 7:00 with the rest of the survey, including the gdp outlook, the outlook on how long the recession is going to last, and the letter that people are looking for, a v, a w, an l and some guys scripbled. >> but a w starts with a v. that's such a great -- >> isn't that interesting? >> well, that means we've certain got to stay tuned.

-- you can't get to a w without a v. >> it reminds me of that thing where the guy in one naengz dimension sees one thing, and the guy in two dimensions sees another thing. you can't know if it's a w or not when you're on the back leg of the v. >> i hope they didn't come up with w, steve. >> well -- >> is it possible, steve, that there's a surprise answer, that it's neither a w or a v? >> it's a b. >> it's a k. >> no. i can tell you it's among the letters that we have been talking about. l, w, v, and then there's this one here. i don't know if they were drawing the waves or whatever, but a couple of guys went like this. >> i hope it's not arabic. that's what it feels like sometimes, doesn't it? chinese, hiku. >> it could have been. maybe. yeah. >> steve, we'll we'll check back in with you in a little bit and we'll keep getting what that letter maybe. we'll see you in a little bit. let's get to the futures pits

right now. ben lichtenstein is the president of tradersaudio.com. ben, this jobs number today, there have been so many expectations that have bmt in. 270,000 jobs lost, that's the consensus at this point. but what is going to be the number that disappointed the number and what's a number the market can live with? >> well, i think mid 300s would be a major disappointment at this point and i think anything below 250 would be a real crowd pleaser. we're also focused on the rate. if you look at 9.7%, 9.8% possibly. it wasn't very long ago that we were looking at 4.6%. fundamentally, unfortunately, whether it's a v bottom, a w bottom, the market has a lot to prove and a long way to go to get back to sustained acceptable levels at this point. i'd like to see the dow up above 10,000 and see some gains from there. where we're finally seeing

positive territory on the year, we saw major hurdles to overcome. the market has been acting much like a sprinter since the beginning of march. stro strong, you know, nice run to the up side. but, you know, sprinters aren't hurdlers and 1,000 right now on the s&ps is a major hurdle that we need to get over. >> ben, you have to admit, it hasn't been so much of a sprint in the last three weeks or so. as you've watched the market continue to have this momentum and maybe it's not skyrocketing higher every day, but it's holding on to gains, even in the faces of pretty disappointing news. >> it certainly hasn't. that's been one of the most impressive things we've seen recently, strong run ups and closing on the highs in this favorable positive territory. and that's one of the things that we see in a very healthy market, a market that can sustain itself. but is it really possible that we can sustain this rate of growth that we've seen? i think most out there feel that

it isn't. we're at extreme overbought levels at this point. we've talked about this before. it's a relative term. that doesn't mean that we're not going higher. again, can we sustain this rate is a real question and yesterday was concerning in terms of the trade active that we saw here on the trading floor. we had a new high in the s&ps and a strong rejection of those levels and a sell-off. i don't think that you can consider in terms of the long-term the rejection that we saw really anything to be concerned about unless we continue to trade lower from this point on. and then these are going to be big levels, the 1005 level in the s&p, that's a difficult level to get up above. in a short-term perspective, there was a rejection yesterday. and that's one of the things i focus on is acceptance or rejection. we have seen acceptance of the higher levels. and one of the bigger concerns right now that i'm watching is the nasdaq, which has primarily led this rally and it's basically stalled out at this point.

>> ben, i realize everything rests on this number. we're waiting for the jobs number at 8:30. but the general consensus is that there have been short squeezes over the last several weeks as the markets continue to push higher. when you have a situation like that that's been set up over a number of weeks, what is the thinking in terms of do you want to be long or short as you head into the weekend? >> well, i actually think that the thinking is you want to be flat and i think that's some of the -- you know, that was -- we saw that reflected yesterday in some of the trading sessions that we saw. it was just basically flattening out with some of the weaker positions that we saw or, you know, some of the less determined positions that we saw. and so i think that, again, that could continue throughout the trading day today. i'm expecting, actually, kind of a quiet trading day, mostly fridays are sort of built up to the point where, you know, they kind of just fizzle out. i could be wrong. don't get me wrong been i didn't bring my crystal ball with me this morning. i can't tell you exactly what's

going to happen. would he have light trading so far this summer and it will probably continue is my guess that we'll just see that sort of fizzle out. there's been too much hype soeshded with this number. i think most of the numbers that really have meant something were the earnings that we saw earlier and some of the other tech stocks. that's why we are where we are right now. the next hurdler or level to get up above with conviction is this 1005 in the s&ps. >> thank you, ben. >> my pleasure. thank you. >> there's a lot to talk about as we wait for this jobs numbers in less than a couple of hours. drop us a note. squawk@cnbc.com. when we come back, it's the news making headlines outside the world of business. he ran off with his secretary! she's 23 years old! - oh, come on. - enough! you get half. and you get half.

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g#e. announcer: call or click today. communicate in less time now for a check on the news outside the world of business. alex witt was with us and monica was back and now monica is back on friday. >> we're battling to get a piece of you, joe. i won today. >> you know what? that's what i like. >> he's mine. hands off! >> and i know that's what becky thinks, too. on capitol hill yesterday, the u.s. senate confirmed judge s o sotomayor as the third female on the supreme court. chaos broke out at a town hall meeting in florida last night. check this out. the topic was health care

reform. incidents like this have been playing out at frequent town hall meetings across the country with reports of death threats and mock lynchings of several members of congress who support health care reform. let's look at great video of a man in england who is attempting to fly from england to scotland in a flying bike. but becky, it's the name of the vehicle that gets me. it's called a flike. >> a flying bike. that sounds a little flakey. >> it does look like chitty chitty bang bang. >> wait, trying to break the report? someone else has ridden a flike this far? >> i guess so. >> eventually they would realize you don't need wheels up in the air. that doesn't shouldabsolutely n,

right? >> it's the landing gear that doesn't retract. >> the faster he pedals, he thinks he's speeding up. >> hey, alex, i just heard yesterday that a guy in china just invented the world's first wooden helicopter. >> does it work? >> apparently. he says he can go really, really high. it was high enough that you're going to die if it doesn't work. >> you know, i just thought of a name for it and then i thought i don't think i can say that on tv. >> give me a hint. >> no. i'm top line you. >> how do you think alex has survived in television? >> yeah. are you kidding? >> please top line me. >> oh, my god, al roker just ran into any studio. i jumped. i'm going to go and cream at him. >> all right, alex, by the way,

keep your hands off of our joe. >> hey, alex, who is the real morning joe. >> you know who i work for, right? but i love you guys, too. >> oh, you mean charles? >> charles joseph, you're right. >> his middle name. all right. never mind. >> monica, when she gets asked that, she just pushes herself out of the shot. that's my advice, yeah. >> alex, thank you. have a great weekend. >> yeah, you, too. coming up, we will get some of the offbeat headlines grabbing our attention this morning. speaking of wild and crazy, it is the biggest day of the month for the markets. jobs report friday. why are the nation's top economists trading in ties for fishing weighters and trout? we have exclusive access. undefeated professional boxer floyd "money" mayweather has the fastest hands boxing has ever seen.

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okay. we're still right in the middle of -- might be recess but we're in the middle of the health care debate. depending on which side you're on on the public option, you have people that say, we could end up like england or canada or france on one side, the cons, we'll say that.

the pros -- and then people that are for it say, well, we could end up like canada or england or france where things are really good. you know, it's hard to even figure out, you know, whether those are good systems. there's an interesting piece that sort of flies in the face of what i've heard how people feel in france, right? eye heard over there -- >> i didn't like that article. >> it's the greatest system in the world, we're all covered. france, as we are headed to france, france is now apparently, according to this article, doing some of the stuff we're trying to do because costs are out of control. >> even though they only spend 11% -- >> they spend 11%. >> -- compared to our 16%. >> right. now they're starting to ration, which is what they're worried about here. they're worried, service cuts, close of a maternity ward near this woman's home, prompting complaints from nurses, doctors and patients that care is

rationed. then another woman who traveled 30 miles to go to a hospital because the hospital that was near her house -- >> my problem with this article is it starts with an -- a piece of anecdotal evidence that never gives any statistics on what's happening. the hospital closest to my house shut, too. it's a stupid article. i didn't understand it any better. the hospital closest to my house -- >> the guy -- >> it shut, too. >> david gauthier, he's a french guy. >> i don't understand it having read this. i can point to similar anecdotal evidence of the exact same situation happening here in the united states. >> more than that, we've had this conversation before where the french or europeans in general are moving away from socialism -- >> you read this whole article? >> yeah. >> to about here. my problem -- they're facing the same problem as we are. they do have to find ways to cut costs. this is sarkozy coming in trying to make this a much better -- >> panacea.

>> it's not panacea. it's not. i have a lot of questions. >> if you're going to cover everyone, number one. all right, that's not going to be -- how is that going to -- that's going to be expensive. the government is -- could end up, a large part of the -- >> a large part, okay. i thought you were going to say the single -- the working group is probably not going to -- >> that's what we're arguing about here. that's what we argued about with the senators down in washington. if it's not a public plan -- everybody's talking about reform. it's whether the government should actually be controlling health care. doesn't matter what people talk about it. i've heard president boem say, you like your plan, you can keep it. i don't believe it. i don't believe that's the way it would end up. >> i don't think you can know what companies will choose. >> look at the house plan and the guidelines in the plan. there's no private company within five years that are going to be comfortable in that marketplace. >> hard to tell. i mean, we've asked a couple ceos and they said, yeah, they would have to think about it.

>> i -- >> they said they'd let the government -- >> they would look at all their options. >> walgreens -- >> cvs. >> i wonder if there will be any private plan. >> and if you believe that you're not going to bend the cost curve, why -- if it's not even going to accomplish what it's supposed to do, according to the cbo, why do it? i have a problem with the health care crisis because 90% of the people have it, and 80% are satisfied. >> costs are skyrocketing, spiraling, and every major -- >> health care is not the story today. it's jobs. when we come back we'll get to that top story. the jobs report, we'll go back north and head to steve liesman in the woods of maine as we wait for the number at 8:30. ♪ you gone fishin'

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the sun is rising on a pivotal day for the markets. ♪ it's the final countdown >> "squawk box" has the final countdown to the july jobs report. 30 of the nation's top economists, money managers and business leaders are waiting for the data in the middle of the woods. senior economics reporter steve liesman has gone forecasting at leen's lodge in grand stream, maine. hook, line and sinker, "squawk box" begins right now. >> good morning, everyone. welcome back to "squawk box" here on cnbc. i'm becky quick, along with joe kernen and carl quintanilla. the july jobs report, it is now just about 90 minutes away. forecasters are predicting the economy lost another 275,000 jobs last month. the unemployment rate is seen

rising to 9.7%. average hourly earnings are expected to tick higher by 0.1%. in advance of the jobs report president obama making a bullish call on the economy. >> i'm convinced that the actions we've taken in the first six months have helped stop our economic freefall. we're losing jobs at half the rate we were at the beginning of this year. our financial system is no longer on the verge of collapse. the market is up. housing prices are up for the first time in nearly three years. so we may just be seeing the very beginnings of the end of this recession. >> the president is scheduled to deliver remarks on the economy this afternoon shortly after 1:00 eastern time. the senate passing a $2 billion extension of the cash for clunkers program. the vote was 60-37. all the proposed amendments were rejected. that means the bill will match up with the bill that was passed by the house. it now heads to president

obama's desk. he plans to sign it into law. the program's initial $1 billion in funding has generated more than $920 million in rebates. and it has helped sell more than 220,000 cars. >> let us turn now to our guest host on this important jobs report friday. his reputation continues to grow. he writes these books that become very important and read. he's ipg chief economist bob on the set for the next two hours. i've known you since, what, 1984? you are chief -- were you chief economist at ef hutton? >> yes, in the early '80s. >> before you had any of this worldly experience. and you were really good back then. >> yes, i was only 12 at the time. >> you were only 12 at the time. also with us is steve liesman in the wilderness of maine at the special summit bringing together the top economist forecasters.

i guess bob is not one of the top ones. he has more of our informal survey. did you get an invite, bob? >> steve, it is important for you to realize that i'm wearing my club tie because i fish quite a bit, fly fish in pennsylvania so i'm very hurt about this. >> reporter: bob, i thought you were invited. i thought you couldn't make it. >> but do you write -- >> forest lake club, and this is where you really go to fly fish. >> do you write a blog and and then you can take it back a month later? >> i think the great thing is the administration didn't listen to krugmen and they nationalized the banking system without nationalizing the banking system. you didn't listen to the right wing that said you let them all go bankrupt. we tried that in the 1930s. it didn't work out. you don't listen to the left wing that said nationalize them. kudos in terms of the bank rescue effort. >> all right.

you can talk to steve if you want. he couldn't get a word in to kotak about what the problem is. >> reporter: he's invited. as joe has been joking for most of the past week -- in fact, the past year, we can share a room there, robert. anyway, let's get to the surv survey -- >> i don't know about that. >> reporter: let's get to the informal survey we've done. we didn't tell you what the gdp and recession outlooks were for the group of 35 economists, we got 25, 23 responses. i don't know what the other guys were doing. but here's the response. we asked them, when they think the recession will end? 39% say it will end in the next three months. 26% say the next six months. 17%, just a few guys, say the recession's over. the answers we got there were may, june and july for the month that it ended. on the gdp forecast, looking for very, very weak growth on average. 1.5% over the next two quarters, pretty much third and fourth quarter. i guess the upside there is 90% say growth will be positive.

30% say a second recession is coming. in fact, we asked that letter -- for the best described the recovery as a third, the most commonly used letter is the "w." we go up for a little while, turn positive and then it turns around and goes back negative again. i don't know what bob's view is, but very -- a lot of pessimism here in terms of a weak recovery and then probably at least the majority -- want the majority but the most often cited view is that it turns back down again into another downturn. >> wow. are you in that camp? >> no, no, i'm not. i think you do have -- because of the violence of the last six months, sort of a fourth quarter/firt quarter and weakness in the second quarter, it doesn't take much to get a better second half. you have auto production in the first half ran at 66 billion, down from 160 billion in 2006.

you've got inventories that fell more than 1% gdp back-to-back quarters. that's never happened in the post-war experience. just the inventory in auto get you to something like 3 percentish second half without any spectacular performance for the consumer. >> steve -- >> reporter: hey, bob? yeah, go ahead, carl. >> if 50-plus percent of the guys at leen's lodge think the recession is over or ending but they give obama almost universally a "d," who deserves credit for the recession ending? the end of the cycle? president bush? who? >> reporter: i think that's what they say, the end of the cycle. in fact, some of the responses i got were that it would be a statistical recovery only. in other words, the numbers will bounce back but it's not going to feel much like a recovery. you know, the other thing i was just wondering about for bob there, this idea of the second recession, i don't think it's that unique.

i think there are a lot of folks who have that. i wonder if that's very much the wall of worry this market has climbed. there's that -- they say there's over a trillion dollars of management among the moelgs here. if that money is so sure about the downturn, i think it suggests there's money on the sidelines and maybe that's a positive for the market in terms of the economic outlook. bob? >> yeah. i think if you think back to '91, '92, '93 or 2002, 2003, what you had was a recovery that was clear in its aftermath. because it wasn't a boom it kept people debating for a couple of years. i think that's a reasonable forecast. but the idea that we'll go back down into negative territory and resume recession, that's not my forecast. i don't think that's what's going to happen. >> do you have -- you heard they averaged all the grades for the president, a "d" in handling the economy. you wouldn't give him a "d"? >> not at all. let's go back four months ago. we were sitting here trying to

convince people it wasn't going to be the great depression. you had extraordinary calls to nationalize the banks by noble prize-winning left wingers. he didn't do any of that. >> octixymoron. >> well, and so, i'm sorry, i give him a b minus. i think the fiscal policy was probably excessive and in the wrong places, but bailing out the banks, without nationalizing the banks -- >> it's all a question of what they didn't do as much as what they did do, right? >> yes. it's who they didn't listen to. >> two unbelievable days, as we've seen from 13 up to -- got as high as 26 at one point. >> it's already better than the $1.67. >> it's on the bottom of the screen. >> we have a press release. i'm looking to see -- >> it's called higher again

today. it had a big move. high on it, don't forget, the reverse split, the high is 514. >> steve, we're going to check in with you later. thanks. talk to you later. steve liesman joining us in maine. let's get insight in the markets from our next guest, chief strategist at deutsche, welcome. nice to see you again. >> thank you. >> any thoughts on how the administration has handled this poorly or not? >> i would give him a "c." i don't think it's a "d." i think the basic problem i have -- i agree, bob's absolutely right about the choice they have with regards to the banks. i think they really need to focus on getting the economy to recovery, which i think we're starting to see some evidence of. all these other policy initiatives are a distraction. you know, if you have a business, it's pretty hard to focus on hiring people when you've got washington so busy changing all these policies all

at the same time. >> yeah. you've written specifically about pelosi. maybe one mistake he has made has been relegating some decision-making to the liberal wing. >> i think so. i think basically congress has had no adult supervision and the administration's been perfectly happy to just kind of lay out the basic premise of what they want. and then leave the details up to congress. when you do that you get a lot of earmarks on pork belly -- pork barrel legislation -- >> which sometimes involve pork belly. go ahead, bob. >> i just have to mention that i was the chief economist at ef hutton but ed yardeni made my career. i had only been on wall street three weeks and they made me the chief economist, so thank you, ed. >> you've done a great job. >> talk to us about the jobs number today. what would be a disappointing number, given the strength of the -- >> i think, you know, there's all kinds of numbers out there.

i think the most important thing we're seeing is that firings are pretty much over. the eventual claims data is coming down, the challenger data has been weak in terms of masillaeoffs. the monster survey of jobs wanted is down. i think we're just not firing as many people anymore. but we're not hiring anybody. and so i think we're past the worst point in the labor market but it's going to be weak. i'm looking for 250,000 to 300,000. it could be a little higher on that based on the adp data. i think the adp data is pretty good. >> does it matter much given we think august and september will be much better because of what's happening in autos? >> well, i think that's going to help. but, you know, manufacturing's not going to be a major source of employment. so i think activity is what we're going to get our pick up in production for the rebound. when i hear the recession is

just about over and -- >> yeah, the productivity data, you have a real tough recession. this is the toughest. you're real nervous about whether or not it will come back. you've got a bunch of people out there with "w" forecasts so you're very reticent to hire and you try to squeeze your existing work force as hard as you can to get that production pop until you're convinced. that's why productivity is to procyclical. we see a surge in gdp ahead of any material rise in employment. >> people often wonder how the economy will go anywhere -- jobs may improve but real disposable income, the main piston of the engine is in reverse. >> i'm in the lower case "v" camp. i think we'll have something like a 5% pop in the third quarter and then a 3% increase in the fourth quarter. some of that is just the arithmetic of inventories. then i think instead of 3% growth next year it's more like 2% growth. it's not terrible but it's

not -- it is a subpar recovery, largely because -- >> the left side is a "v." the first part is way down, right? >> well, i think -- >> it's a new one, all right. >> the square roots -- >> we've heard the dotcom recovery, www. >> is there good precedent that either one of you guys historically know of a "w" afte such a deep first "v"? >> the 1930s didn't work out particularly. >> was that a "w" or -- >> that was unprecedented. >> and, that's the big debate about central banks. people say greenspan's big mistake was he tightened too late. in the 1930s they tightened in 1931. people would submit that was early. in the 1990s in japan they tightened to early. and so when you have this big kind of event that has a

deflationary tinge to it, it pays to linger a bit before you start to rein in -- >> with the exception of that big awful event, we're used to v-shaped recoveries. >> thanks for your time. good to see you, as always, ed yardeni. let's take a very quick look at shares of aig. if you want to take a look at the bid/ask in the premarket. company coming in with earnings of $2 .30 a share versus $1.67 the street was looking at. now there's a press release out from the company at this point. they're continuing to talk about how they will see continued volatility in results in the coming quarters due in part to some accounting charges related to restructuring. they also talk about how they continue to have many businesses. they're in discussions right now with potential buyers for a number of its other businesses. and the ceo says that reductions in net realized capital losses, positive valuation changes on

changes interest helped in the second quarter. we'll keep an eye on this and tell you what happened. the company saying aig, performance trend stabilized from the first quarter. if you have any comments or questions about anything else you see here on "squawk," go ahead and e-mail us at squawk@cnbc.com. when we return, skip the pocket protecters, the nation's best and brightest economists are grabbing paddles and fishing poles right along with this be nir, pencil this is morning. the annual forecasting summit is under way in the woods of maine and we're there with steve liesman and friends. "squawk box" will be right back. time now for today's aflac trivia question. on this day in 1974, what legendary stunt caused a massive traffic jam in new york city? oof! i hope he has that insurance. aflac! you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills

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now the answer to today's aflac trivia question. on this day in 1974, what legendary stunt caused a massive traffic jam in new york city? the answer, phillip petit walked across a tight rope strung between the twin towers of the world trade center, 1,350 feet above ground. around this time of year the woods of maine become the

epicenter of economic forecasting. joining us from grand lake stream, steve liesman. take it away. >> reporter: some of the best and brightest gather here at leen's lodge, do a little fishing, a lot of talking. there's a lot to talk about. i'm joineded by one of the best and brightest, when it comes to finance,ing, the banks and economy, josh rossner. thanks for joining us. >> thanks for having us. >> reporter: you were one of the guys who was more optimistic than the average when it came to the economy. what's behind this optimism? >> i mean, look, we have a lot of stimulus programs in the works, a lot of stimulus spending still ahead of us, cash for clunkers which is going to add to gdp. we've got the big banks actually have, for the most, been adequately capitalized even if i think they're underreserved longer term. i think we have a couple of good tailwinds, including psychology helping consumer spending at this moment. how long that lasts, i think, is a big question. >> well, now, when we asked you for your letter, you were the

ones we were making fun of you before. >> that's right. >> reporter: you went like this. >> it was a double -- it was a double "w." it could have been a double "u" or triple "u" which means we have positive tail winds pushing the economy forward. we have the stimulus. i think by middle of next year we'll realize we're back on the way down. largely because 50% of the total economy employment is tied to companies of less than 500 employees, 44% of total payroll. when you start actually looking at those areas, one, they're funded by small banks which have the bulk of the bank problems ahead of russ in the small banks. two, as you look at it, i think those small businesses actually increase firings. i think that becomes a big problem. >> reporter: i want to get back to the small banks. you have an upbeat -- it's not upbeat but a pretty good optimistic view of the big banks. are they adequately reserved for

what's going to happening with the consumer, for example, declining wages and other foreclosures? >> yes. assuming the scenario we have and the expectations of gdp. even in the worst case scenario we hear here for the next couple of quarters. as the economy turns back down, in my second half of the "w," i think that we'll have problems again. i think they're going to be underreserved for the stress test. i think they will have problems again and i think they're not adequately provisioned for anything worse than the baseline people here are even talking about. >> reporter: let's get back to the small banks. if the small banks are under stress, is that going to matter a lot for the economy and credit? >> i think it will matter a lot, actually. we had too much concern about cit, not enough concern. the problem is not a lack of band width but a lack of available lending out of the small banks. this is part of their bread and butter of their business is small business lending. >> reporter: we're going to run out of time. do you think the regulators, when they talk about some of the programs in place, do you think they need to be concentrating

more right now on the problems of the small banks and getting them in shape for what's going to happen with the economy? >> absolutely. i think that's absolutely -- that's critical. what needs to be done is we need the small banks, while they have a window to be able to access t.a.r.p. money or recapitalize in the public markets, they can. >> reporter: you say they can access t.a.r.p. money? >> i think that's right to some degree except those that already troubled. we have a lot of institutions with trust preferred securities where they have deep problems. we'll see a lot of problems in those trust preferred banks, with a large amount of equity capital from trust preferred. >> reporter: josh, thanks much for bringing all your smarts here. i was looking for my fishing rod. joe? >> yeah. >> reporter: joe, are you there? >> i'm here. >> reporter: so i've got a joke for you. what's this? >> i don't know. >> reporter: it's a forecast, joe.

>> that's an economist fishing -- is that an economist fishing joke? steve, keep your day job. >> reporter: i thought of it myself. >> that's an economist -- >> reporter: i stayed up all night trying to work on that. a forecast. >> that's a 52-week low. >> i did worcester sauce earlier. and i got so panned. dennis gartman, oil, gold, copper and more, how he's playing the markets and how you can join the party. of course, don't miss the event of the morning, 8:00 a.m., the jobs reported.íy

got any comment or questions this morning? are you ready for the jobs number? sent us a note. our address is squawk@cnbc.com. when we come back, what pay week for the markets. wild swings in everything from stocks to bonds to commodities. "squawk" favorites will make sense of it all. if you think the first four sessions have been crazy, wait until 8:30 today. the july jobs number, capable of turning this tale on a dime.

"squawk box," the code name for cnbc's highly trained special mission force. its purpose, to inform, inquire and investigate today's business

topics. kernen, quick, quintanilla, they will never give up. they will stay until the job is done. wherever there are earnings to report, we're a stock story to tell. "squawk box" is there. >> we love that. welcome back to "squawk box" here on cnbc, first in business worldwide. we're one hour away from the jobs number for july. in the meantime, get a check on the markets right now. futures are a little bit lower by about 15 points or so. aig shares are called higher again. the stock is already jumped about 75% over the past two sessions. in what david faber says is a short squeeze. quarterly profit came in short of estimate. cash for clunkers program has been refueled. the senate passing the bill to give the popular program 2 billion additional dollars, matching an early action by the house. and the royal bank of scotland said to take a big hit.

the bank posted a first half loss of $1.7 billion, driven largely by bad debt. it says the results may not improve substantially for another two years. >> i wonder if shareholders -- long-term shareholders? joining us is kevin, chief market strategist at kronus futures management. dennis gartman is the founder of the gartman letter and our guest host bob barbera. everyone is watching and waiting for the jobs report that's out in less than an hour's time. dennis, you bring out an interesting idea in your note from this morning where you talk about clues we may or may not be getting from president obama. he spoke last night and what caught your attention? >> the fact he said we may have seen the worst of the jobless losses, we may have seen them cut by half. we know that the administration gets to take a look at the number before time. get it last night. looks like he's already told us

it's going to be around 250,000. i think that was a leak and we ought to pay attention to that. >> bob, you said that earlier. >> the fact he spoke last night enthusiastically he suggested it was cut in half. the peak numbers were 700,000 so i don't know we know it's 250,000 but it takes a shockingly bad number off the table. i wouldn't want to be the president of the united states giving that speech last night with the number and then have it come out and look particularly bad. also in washington, they do care a lot about the unemployment rate. and so it would be quite unlikely the unemployment rate surprises us all and spikes this morning. >> kevin, are those things that guys on the floor are paying attention to? >> you bet. the only thing i would add anecdotally is that traders are going to function on something that is, if you get that number and the market -- i'm talking about equity market does not like it, then watch out. because what you really have is

shares of fannie going up, shares of aig going up and the government now with a full understanding of what we used to call two months ago the second derivative. that's what -- after the number, hold your breath for eight seconds and see how the market has much already digested that information. >> what do you mean exactly? what could change eight seconds later? >> well, i think what you have is information -- that the market is fully already discounted the information that the president is now alluding to. so it's all about how they take that market -- how they take that information after the fact. >> and the market's benefitted from the bottom up information. >> most definitely. >> about what will be reflected in this number. bottom up, the company said it looks like the worst is over. if this number confirms that, the he can quit number has already seen that on a bottom-up basis. >> kevin, what if we don't get the number we're expecting? what if it's 350,000, 360,000,

even 400,000 jobs lost. >> it's tougher to manage the other way. futures contract for forward -- rate hikes offer the opportunities to hedge that risk. we're putting in multiple rate hikes into the beginning of next year now, so people can manage that risk by saying, well, if this is -- if this number's worse than expected, then those rate hikes will go away. i think there's opportunity there for sure. >> dennis, would you agree there has been a lot of hesitation among traders? nobody really wants to put a big bet in one way or the other before this number comes out? >> absolutely, becky. i cut my stuff down by almost two-third yesterday afternoon for the simple reason that we have this silly number coming out. i'm not even going to be in the office when it comes out. i'll take a look at it a half hour later to see what 100-point decline or 100-point rally you get in the dow after the number comes out. that's what happens. the randomness of it is so

idiotic and the revisions are so agrej yously large. either not to be around. >> you cut your positions by two-thirds and, what, did what, put it in cash? >> went to the sidelines. i'm going to go buy scotch. going to buy welsh whisky, actually. >> we have been watching the dollar ahead of that and that's made a big impact on the commodity prices. >> the dollar has been the driving force in all the commodity markets. if you take a position in crude oil, you make an implied bet on a direction of the u.s. dollar. as goes crude the dollar goes the opposite directions. a weak dollar gives you strong crude, a strong dollar gives you weak crude. a strong dollar gives you weak commodity prices. the dollar has been a one-way bet recently. everybody you know is short the u.s. dollar against everything, and specifically against the euro. you have to be careful there. >> does that mean when everybody gets into the street it gets too crowded and you're waiting for a turn? >> way crowded. it's like throwing people into

one life boat, sitting on one side and it tends to tip and you'll probably get wet. >> kevin, i heard you concurring with that? >> you bet, becky. i say if you look at the hard numbers between our central bank and the boe and the ecb, they're actually printing money faster than we are. so the concept is a little convoluted. watch out when mists starts to break down. things get hairy. >> we saw the boe say it's going to put another 50 billion pounds into it. that helped the dollar but gave back some gains by the end of the day. >> right. people aren't on the story just yet. then all of a sudden they'll change. you know, i think that if you dive into those numbers on thursday afternoon from the fed, you can see that they're playing a very aggressive game right along with us. so this is what jim greg called years ago monetary hot potato. we are definitely in the throes of it right now. >> hey, bob, what do you think happens over, say, the next couple of months as you watch

what we saw yesterday with this quantitative easing decision, the hot potato kevin's talking about. who winds up getting burnt by it? >> i think the dollar and yen has been more about the reversal of the risk trade. there was panic, the dollar went up, commodity prices went down, equities went down, treasury bonds went up. the world looks like it's not going to end. we're sort of back in business. all of those have -- i don't think it's straight forwardly people are selling the dollar and buying the commodities.n i think it's that they're stepping back from their risk-free state, treasury bond yields going up, and they're buying risky assets. >> although some worry about some sort of new structural carry trade with the dollar, where people will short dollars to leverage up on others and will end up with inflation on the stuff we need and a lid on the assets we own. >> yeah. i think somewhere down the road maybe. one of the best things we can talk about in terms of that

trade, in november/december baa bonds were yelleding 9% and the treasury was yelleding 3.5%. right now baa are yielding 6%. a 300 basis point decline for risky bond yields with no change of any significance. for treasuries, that's just stepping away from the risk-free asset and the risky assets are improving. that's all to the good. >> dennis, what will you do? you say that you'll scale back on two-thirds of your positions. let's assume the number comes in roughly where we're expecting it. let's assume the markets don't go heywire. what do you do at the end of the day? >> depend on which market. but if we get a number close to 300, i'm probably going to come in and start selling stocks a little bit. if we get a number near 300 i'm probably going to buy gold a little bit. if we come in and the number is near 300 i'll probably sell the euro against the dollar. those are the things i'll end up doing today. >> why do you sell stocks? >> give me a little toppy.

it looks like to me -- a lot of stocks yesterday did something technically that i find disconcerting. one of the leaders, alocoa, for example, made an outside revers reversal, made a new high, closed lower on the day, closed before the previous day's low. you saw a number of stocks do that, steel, all sorts of things turned bad -- or all session long. those are the types of trades i'll take a look at and say, i think you're getting a little toppy here. >> what if the number comes in closer to 200,000 jobs lost or even below that, does that change your mind about the stock market? >> yes. then i'll pay attention. i probably won't act on it today. if we come in at 200,000, 250,000 and then if the stock market doesn't rally, then it's really got a problem. i think that's a more important circumstance. if you get a really good number and stocks don't go up on that. >> i think we're changing the whisper number. >> we're changing the whisper number by what we've just been talking about by what the president said last night? >> yes. >> where do you think it's

headed? >> you said what if it's under 200,000. >> dennis, before we go, you know, everyone is looking for this bounce in manufacturing based on, whatever, cash for clunkers, so forth. >> sure. >> will you start -- i mean, will steel production start, the new star metric over the next couple of months to see if, in fact, manufacturing did bounce? >> i think that's a good one to look at, carl. steel production will be interesting. it will be interesting to see how much salvage -- you know, how much steel went into, as we crush these cars, what are the salvage lots doing. there's all sorts of arcane numbers that we'll be taking a look at. i do think this cash for clunkers is one of the silliest ideas i've heard of. let's go out and break all the windows in the country and have the window manufacturers have a better year. >> i've heard other people say what you need to do is blow up houses all over the place. that will take care of our housing problems. >> i need a new golf club. my old driver looks bad. can't we have dollars for

drivers. >> fore! >> dennis, kevin, gentlemen, good to see you. >> thanks for having us. when we come back this morning, maine is hundreds of miles from wall street. i'm not sure how many. do we know how far maine is from wall street? >> about ten hours' drive. >> hundreds. >> but big banks are never fa are from the mind of our top-notchers gathering there for a forecasting summit this weekend. steve liesman and chris whalen will go fishing for the real story on financials. welcome to progressive.com. you must be looking for motorcycle insurance. you're good. thanks. so is our bike insurance. all the coverage you need at a great price. hold on, cowboy. cool. i'm not done -- for less than a dollar a month, you also get 24/7 roadside assistance. right on. yeah, vroom-vroom! sounds like you ran a 500. more like a 900 v-twin. excuse me. well, you're excused. the right insurance for your ride. now, that's progressive. call or click today.

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♪ >> that is a gorgeous shot. you have to admit. it sort of makes you wish you were there. >> maybe we'll crash the party next year. >> that would be fun. live shot of leen's lodge, maine. >> there's no women, becky. one thing i know. >> no women are allowed? >> it's a little weird there are no women economists. i'm not sure. it seems a little bit -- >> that's why we're not waiting for invitations. we'll go without. >> we'll just pack up and go. somebody who's already there is our own steve liesman. he has gone forecastin', without

the "g" at grand lakes stream, maine. to focus, you'll turn to banks and the financial system specifically, sfl specifically, right? >> caller: we drop the "g" sometime between boston and maine. you are welcome. i had to have a smile on my face because i know the number will be a serious number when it comes to the jobs report but let's talk about banks and banking and investing in banks with chris whalen, the founder, president, ceo, chairman, all the other potential title for analystic risk. >> dennis santiago is my ceo. >> reporter: great. let's talk about the banks. they have run a long way. do you think folks should not get in right now? >> it depends. i've been telling our client if they want to get in quality names and ride out the rest of the year, we don't mind that. i think the larger cap names ran because the market wanted them to run.

i look at q4 and asking myself, are we going to have another blood bath like last year? >> reporter: what does that mean? >> charge-offs. if you listen to the calls, i would especially encourage people to listen to bank of america call, the capital one call -- >> reporter: what did you hear? >> you hear management teams that don't have visibility on when the peak will occur and how long we'll be there. in previous recessions we would peak and come off -- >> reporter: not too be too skeptical, if they don't have the visibility, why do you? what do you see you feel they're ignoring? >> we're seeing building reserves. until we stop building loss reserves, the earnings are going to be impacted. >> reporter: i don't want to be too pa joertive but a bank executive has to be an idiot not to overreserve and seriously reserve for what we see in the economy. >> i agree. >> reporter: are you ignoring what they're doing out there? >> no, they're not. quite the con temporary. they're trying to stay ahead of the bear they're chasing pem, to use a woodland metaphor, and

they don't know how long they'll have to run before the bear gets tired. >> reporter: i don't want to overlabor the point here. ultimately this is the most important question when it comes to the banks. have they reserved enough for losses that are coming? you think there's a potential another round of huge chargeoffs in the fourth quarter? >> just to clean house. if you're a bank and you -- fourth quarter is always when they do it. the answer is no. look at u.s. bankcorp, over 2% chargeoffs, i think they would go over 3%. 3% reserves isn't enough. we'll have to talk about 3.5% to 4%. >> reporter: how about relative to the stress test r they on track to stay within the parameters of the capital requirement in the stress test? >> the fed thesis was they were going to earn "x" plus the capital to get them through the cycle. i don't think that was correct. i think the earnings powers overestimated by the fed, especially given losses in prospect now. the other question is, did they raise enough money? i don't think they did.

>> reporter: my reporting suggested they thought they were conservative on the earnings. you think they were over the top in. >> i think they were optimistic. the industry is going into a period of uncertainty because we have not seen loss rates like this before. people say, well, it's not like the 1930s. no. it's between the 1990s and the 1930s. yeah, i guess that's good news but it doesn't make me feel that -- >> reporter: people are still going to be chasing these bank stocks right now. >> absolutely. >> reporter: do you think there's a way in and a reasonable way for an investor to proceed? >> again, quality names. cullen frost, bank of hawaii, west america bancorp. look at cullen, they have 1.5s. but only 50 basis points of charge-offs. they are adequately reserved in my opinion. there are other banks that will have lower than peer loss rates through the cycle. if you want to position yourself, i could live with that. >> reporter: what about commercial real estate, we didn't talk about that. how bad of a hit is that to the banking system? >> it's going to be interesting.

half of that asset class is owned by investors so we won't see the restructurings. >> reporter: inside the bank. >> right. i think commercial will be pretty grim. we work in that sector. we is a joint venture partner out in california that does disposal. i think it will be tough. loss rates on commercial will be much higher. >> reporter: you said blood bath in the fourth quarter. after the backstops from the government, are we in a shape to take this blood bath and not have a panic the way we did a year ago, or is it a potential we could get to the abyss again? >> well, i think we're not dealing with the level of uncertainty and confusion we had last year. but i think investor had a problem. they were underinvested in financials and they had to get back in. they can't sit on the sideline. they have to get in. our clients will call and say, why don't you own these stocks? the europeans missed this entire rally. >> reporter: thanks for your thoughts. >> my pleasure. >> reporter: that's the flavor we get from leen's lodge.

it's a beautiful place. everybody's happy to be here. but very, very realistic, to a point somewhat pessimistic when it comes to the outlook for banks in the economy. >> it's not just banks and the economy. we're watching the jobs number out in 40 minutes' time. steve, stick around. we have a lot more to talk about with you and the other economists who are there as well. bob barbera is on set with us. when we return, we'll have stocks to watch. you think the jobs report is big? check out next week's lineup. "squawk" icon and rebel mohamed el erian, nouri roubini, bill frist, hedge fund legend michael steenhart, ivanka trump all next week. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 i always have my eye out for a stock on the move. tdd#: 1-800-345-2550 doesn't matter if a company sells computer chips tdd#: 1-800-345-2550 or, i don't know, fish and chips. tdd#: 1-800-345-2550 i'll look at all kinds of stocks before i settle on one. tdd#: 1-800-345-2550 if i think i'm onto something i'll check it out, tdd#: 1-800-345-2550 you know, see what other traders are up to.

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♪ ♪ >> just put them in the water at leen's lodge and let them go home instead of imprison them and make them play this music. >> does that walrus look unhappy? he's not unhappy. is he the walrus. let's take a look at some stocks to watch. aig reported $2.30 as we've said a few times. they're adjusting this to $2.57.

unclear whether that's what you compare to the $1.31 estimate. the stock's run up from 12 or 13 in the last couple of sessions. there's a lot of noise in this report. you can imagine. $180 billion in government money -- >> they talk about the businesses they're looking to sell, where they talk about how you'll see volatile numbers continuing. >> tough enough for regular financial much less one with all the moving part of aig. >> good for the investment banks. >> and if they do their job well, maybe we'll get some money out of this. as taxpayers. i know you care about that. >> yes. >> leap wireless reporting second quarter losses wider than expectations. as a result it will be a big loser. down 28%. revenue was also below. three analysts have downgraded that. crocs reported a six cent loss.

that looks to be quite a bit better than the estimate for 21-cent loss. up 39% after hours. but that was one of those broken beloved angels that everyone in the world was going to be wearing those. then they jumped. remember we talked about that? >> they were trying to make clothes and -- >> croc boots. hansen natural reported 60 cent n line with expectations. revenue was about $10 million below. that's another one of those. i think that may have split, though. amazing how many -- that took the world by storm for a while. >> that's right. >> i've never even had one. >> i think i have. beck? >> no. >> pretty good. coming up this morning, cue the videotape. ♪ it's the final countdown >> it is the final countdown. 30 minutes and ticking until the july employment number.

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this is a special presentation of "squawk box." employment report friday. it's the main event for markets. and "squawk" has it covered. from the labor department to the trading pits and the would this of maine. get ready for the final countdown. >> don't mess with the bull, young man, you'll get the horns. >> "squawk box" begins right now. ♪ don't you forget about me welcome back to "squawk box" here on cnbc. first in business worldwide. this has got to be about john hughes, who died way too young, 59. this is from "breakfast club ". >> it is, simple minds. >> which introduced a lot -- >> the whole brat packers. >> "home alone," "vacation,"

really a walk along central park visiting and had a heart attack. i'm joe kernen along with becky quick and carl quintanilla. the july jobs report is 30 minute away. forecasters predict the economy lost another 250,000 jobs last month. the rate is seen rising to 9.7%. average hourly earnings expected to tick higher by 0.1%. the futures right now have be been -- they've come back but not big moves. believe me. we're down maybe -- indicating 25 point of pressure. now we're indicating two or three. aig came out with numbers that were above. that stock is called higher. but dare i say, all eyes are on the all-important -- >> it's amazing. market is just flat, waiting for this suspect sitting still, essentially. >> we'll see how it influences the tech-heavy nasdaq.

>> and the small business heavy russell 2000. >> exactly. >> the major economic news we're waiting for, less than 30 minutes away. we've got the gang here to preview this july jobs report. our chief economist today, diane swank, mark zandi and bob barbera of itg. deep with us from deep in the maine woods, steve liesman, stuart hoffman, chief economist at pnc and chief dunkleberg. guys, let's try and go around the horn and get everybody's opinion in on this. diane, we'll start things off with you. i know you're a little more pessimistic than the consensus. >> i am, although i think we'll recoop in august. i'm looking for a 400,000 decline in jobs. i think we're not out the woods on the jobs number but we'll be getting better in summer with the pick up in car manufacturing. this is a still a tough time.

i would be delighted to be wrong this month. >> bob, what do you think? >> i'm down 275, 290, something like that. i think diane's point about picking up in august, the seasonals are tough in the auto industry and how it will effect the number but i think we all agree that it will improve in the months ahead and i'm hoping we'll see improvement. >> mark, what about your number? >> i think 300,000. i think that's a reasonable number, given ui claims and given the ism surveys. the two other key statistics are average hourly earnings. they were flat last month. they've grown on the slowest rate on record. that's a good indication to watch. they're expected to rise. that's key. then our average weekly hours, they're at a record low. that's a good leading indicator. if that increases, that would be a positive sign. >> we'll keep an eye on that number as well. stuart hoffman, why don't you weigh in with your expectations? >> i'm not too far different, around 325,000 down. i would echo what mark said

about the average hourly earnings, weak. also, the hours -- the weekly hours. what often happens is that goes down, before businesses hire they start to work their workers longer hours. particularly the people who are part time start getting more hours. so i think if that does tick up a little bit, 0.1 of an hour, that would be a positive sign and it would mean total hours worked, which is a pretty good proxy for a monthly gdp, if we had one, would be down but not as much as the last several months. >> we'll keep an eye on that number. paul, why don't you tell us what you're expecting. >> it's hard for me to add too much with what's already been said. i think it's important to look at the whole report, particularly the hours and earnings. i know the unemployment rate and nonfarm payroll get all the attention but the details at a turning point will come through in the hours worked, i think, so that will be important to look at. we're at a turning point in the economy. but we will get a top in productivity as we get the sunny

side of the inventory cycle. i'm in diane's camp that it's going to be a long time before we see something meaningful on the job creation front. >> bill, a huge question and a huge concern that we've had is what's happening with small businesses because they create so many jobs. what's your expectation for what we'll see in this report but also your larger concerns? >> well, the good news for us is the bad news was not as bad in july, and so in june we reduced employment by 1.25 people per firm and this time it was only 0.8 of a person. that's good news. we're looking a little bit better. we saw a few more people raising worker comp, which was good. reduction in those cutting worker comp. a little action there. but if you look ahead at our plans, you know, the percentage of firms who plan to reduce employment going forward is still larger than the percent who plan to add employees by about 3 percentage points. better than it was three or four

months ago but still negative. we would like to see that improve. it looks weak. if you bottom line it and plug it into our model, we still have the unemployment rate headed down toward 9 by october, by the next -- you know, the end of the next three-month period. we see kind of peaking here in the unemployment rate fairly closely. and then headed down. we would like that to happen. >> steve, you get the difficult task. after i let everybody else talk, now we'll ask you what you would like to add to all that? >> reporter: well, i don't do forecasting. first i have to point out here, is how calm paul is. some people get jitters when they have coffee, some have a cigarette. he came up and said he had no bond information. he had no bond informing, the poor guy so he's doing his best to control himself here. my thought is this. i've been talking about this for a couple weeks. i think employers may have overfired here. and i think if they can get an all-clear signal from the economy, a couple -- a couple decent economic reports that show the economy on good footing, there's a lot of people

they would like to bring back on relative to even the underlying weak demand out there. i think that possibility exists for, perhaps, bucking the trend of the last two recessions and have a more v-shaped recovery in the jobs market. i think what everybody said is right. i'll be looking for one thing, as stu suggested, part time for economic reasons. i wanted to see that number come down, along with what stu said, you take the people online, given the uncertainty over health care and benefits, and you give them full-time work before you bring full-timers back on. that number must come back down. it's been incredibly spiked. >> diane swonk? >> yes. >> is kotak ever called you, invited you, extended an invitation to you? >> you know, i -- >> reporter: stir it up, joe. just stirring it up. >> i talked at one of dave's convention this is year. we are all good friends. >> so it's okay for you to -- >> you know, it's -- we have -- >> reporter: hey, joe. >> he said, diane, if you want to come, you can come.

a little too much -- >> joe, i've not been invited, joe. i've not been invited. >> and mark. why not, mark? >> he's invinted me to a dinner or two but never up to maine. >> you're making enemies left and right. >> they said, if you want to come, you can come. i listen to what they do and i think i'm just fine in chicago. >> i'm not stirring things up. i'm just trying to clear the air. >> no air -- >> no, you're not, joe. you're trying to create trouble. would you admit it? you're trying to stir it up like you do every morning. >> i just wonder if you know what goes on up there. maybe you're not the right type of woman that -- i mean, there's a lot of guys -- >> i don't know. i don't know what -- i'm just wondering what goes on. i don't know. >> well, i have heard over drinks, so -- >> all right. get me out of here. >> yeah, get you out of here. diane, seriously, the reason you look at this from a more pessimistic perspective, the reason you think this will last longer, can you lay that out again? >> yeah.

i do have sympathy for steve's view and i think there has been overcutting out there. that said, because of the credit crunch and because of the problem in credit markets, companies are going to need to have more cash flow, more cushion before they actually get into the game of hiring. short-time financing that had been part of the game of meeting payroll just isn't a game they can play out there anymore. and so i think that might delay it even when they want to hire. they'll have to hold back and pick up their balance sheets more. it means more profits before we see big increases in employment. although i am looking for a december/january turn around in employment. >> bill, is that why you think you hear the most concern from small business owners who say a greater percentage of them say they still plan to cut? >> i think that's right. i think what we're waiting for is customers. so in the second quarter the consumer disappeared, for heaven's sake. >> what's important, bill, that labor's cheap right now. >> it is cheap. >> it is down -- if you get a little extra marginal revenue here, there is every -- plus productivity is relatively high.

>> you've got to have some customers, but i think you're right, i think we lowered down the cost-cutting because we were scared to death, depression, all these things we heard about. so we've overdone it. and as soon as sales do come back, profits are going to look good, number one. on we'll do do very well. we get a dollar -- >> what other reason -- what other reason -- >> we'll have to hire faster, you know, in order to catch up with sales because we're really leen. very leen. >> mark? >> yeah. i would like to say one other reason to be optimistic about jobs is underlying producttivity growth is slower, particularly compared to earlier in the decade in the wake of the internet and all that did for productivity growth. it's going to be much more difficult for businesses to generate sustainable productivity gains. as soon as sales pick up, it's more likely they'll have to begin hiring more aggressively. you know, it's going to be a weak job market but not as weak as the jobless roefrz, i think, in the past two -- in the past two recessions. >> i agree.

>> i agree it's not going to be as weak because it was really weak in the last two because we didn't fire as many people. there's just no -- you do get to the point where, you know, in the economy now we've gone so low, there's nowhere to go but up. at some point we'll get that in employment, as well. >> hey, bob -- >> reporter: can i -- >> steve, one second. bob, steve pointed out that labor's cheaper. the cost of labor is cheaper. but you saw the minimum wage rise. >> steve made two point that were important in terms of this cycle. did you have a slow-motion recession for nine months that most economists missed. then you went into a global credit crisis. and you had wild hoarding of cash. when we lost access to short-term credit, as diane said. that access is returning. it's not completely back but returning in an important way. the commercial paper market's working. and so the "v" we talk about for inventories could carry with it some "v" aspects of hiring.

i think steve has a point. this was a more violent plunge for inventories and employment. so you've got some opportunity for a snappy improvement maybe starting in the late fall or fourth quarter. >> steve? >> reporter: yeah. i just wanted to engage paul here on the federal reserve, given the outlooks that are here, our survey suggested of the folks that are here that most the fed will be on hold for the better part of a year here, or at least -- or longer than a year. what's your outlook? is there a possibility -- plug in this idea potentially faster return of job growth. >> i'm certainly on the longer side of whatever consensus is here -- >> whatever they are, you're further snout. >> i'm further out. >> good indication. >> when ben bernankes he'll be on hold for an extended period, he'll be on hold for an extended period. even if you see a faster than expected job recovery, i still think that hold because we've got such a huge unemployment gap. and i think that the fed is committed very appropriately to

making sure they don't do a 1937-138. if they're going to make a mistake, it will be later than sooner. in fact, i wouldn't consider that to be a mistake. i actually would like to see a little higher inflation rate in this economy. >> we've got to wrap it here. >> doug cass is -- i asked him on the air, he says, yes, on the air. he will accept next year. he turned you down this year. i'm going to -- i'm quoting him. if he can bunk with swonk not ripple. i don't know what he means by that. he actually said that. i'm not kidding. >> i'm newly married. >> that's up to diane more than -- i think barry is, you know, he's easy in that regard, but -- >> he's what? >> you need to talk to diane more than anybody else. never mind. >> don't go there, steve. >> don't call him easy. >> we'll be back with our forecasting team. everybody stick around. we've got places coming from around the globe. philadelphia, chicago, grand lake stream, maine, and right here in engelwood cliffs.

the jobs report breaking in 13 minutes' time so stick around -- wait. 12 minutes from now. we'll be right back. no, i did the math wrong again. i can't add or subtract. >> we are going to take a quick break. the nation's employment picture will be front and center for the white house as well, but it's just one big ticket item on today's agenda. we'll check in with "meet the press" moderator david gregory to tell us what's on the line for the president on this jobs friday.

i'm convinced the actions we've taken in the last six months have helped stop our economic freefall. we're losing jobs at half the rate we were at the beginning of this year. our financial system is no longer on the verge of collapse. the market is up. housing prices are up for the first time in nearly three years. so we may just be seeing the very beginnings of the end of this recession. >> that's the president speaking yesterday about the economy. we are a few minutes away from the jobs number. capping off a busy week for washington and wall street. joining us this morning is david gregory, moderator of nbc's

"meet the press." he joins us from washington. good morning. >> good morning. >> he's selling this pretty hard, even though his grades on on the economy have not been stellar. if this jobs number comes in pretty good, how much credit can he claim? how much credit will he claim? >> i think they're going to try the make the argument as he just did and they have that the rate of job loss is slowing. i still think that's comfort. you have roughly 2 million jobs lost since the stimulus was passed. larry summers saying last week, look, we're surprised, we didn't realize just how bad it was, which raises a lot of eyebrows, gwy given that larry summers was writing about this before he came into the administration how bad things were at the time. they'll make that argument. they'll look at housing and try to put the screws onto the banks and make sure that they're modifying mortgages at the right pace. they have the clunkers program giving a little lift to consumers. they can make all of these arguments, but they're still up against a very difficult fight right now, which is, you know, housing and jobs.

your house and your job and how people are feeling out there, which is obviously impacting the health care debate. >> that's amazing. we had someone on the show earlier in the week saying the president's not doing enough of a cheerleading job. if the cheerleader at the notre da dame/michigan game is asked, who's going to win and she says, i'm not sure, that's a problem in that school of thought. you don't want to behoove saying the worst is past. >> but the president is saying we're in a very different place. his top economic team saying we're in a very different place. the problem, you know, americans are going to be impatient about this. they're still feeling the effects of very high unemployment, even higher underemployment with high double-digit unemployment rates in states around the country that are, hit extremely hard. so the idea that the wave kind of passing over sh, people will be feeling the aftereffects of that for some time.

>> there's a good piece in "the journal" today talking about deficit spending and how that is the new measure by which politicians may be judged. do you believe americans are suddenly in tune with our federal deficit and debt and if so is that because they're worried about the future of their children or the future of their own taxes? >> i always have thought of this as kind of an abstract concept. if you look at it more tactically, independent voters who are a big voting bloc for this president, who many of whom are republicans who were diseffected by president bush, are the voting bloc that really starts to worry about expansion of government, whether government's operating well and whether the deficit is getting too big. and i think there are an increasing concern about that, about how much government can actually do, how much can-t can manage effectively and where it's all headed. and whether it has real pocketbook effect down the line. and i think that is a growing concern. the ultimate question is, you've got the government out there

priming the pump, priming this economy. where does growth come from that's actually sustainable when the government takes a step back? that's a question that has to be addressed. >> you know, david, there are conspiracy theories floating around the trading floor today. some traders we spoke with earlier, they think the president got a look at those numbers yesterday. i guess around 4 :00 his administration can get a look at the jobs number. they think he talked last night maybe knowing something. have you ever asked the administration about whether they would be tipping anybody off to an early road to the jobs report? >> i don't know directly about yesterday. certainly they spent last week previewing the fact that it was going to be pretty bad this week. so they've been trying to set expectations to get a disappointing number. they made the case last week with the gdp numbers that they got a bump from that. and, you know, they drove that pretty hard. i think they're going to drive this number pretty hard as well. >> are you convinced, david, turning to health care, this

working group in the senate is going to come forward with a plan that does not include the public option as we've come to talk about it? and do you think the recess has been in some strange way good for the president because all the anger at these town halls is all aimed at congress. >> it's aimed at congress but i think it reverberates and hits the president as well. the white house thinks all of that will backfire by some tactics used and rhetoric used. the president has to really step up here during august and frame this debate differently. you'll hear a lot about consumer protection. you know, he's trying to fight different battles at once. the idea he can keep costs down and that the government can afford this, as well as telling people with health care insurance, you're not going to lose anything. that's a very difficult fight he's got. they'll make the argument that the recess is helping them because more time allows this to settle in a little bit. but that assumes that he can really test -- road test this argument and then actually win this argument and that he needs more time to do that.

and, you know, so if you can put that together, then, yeah, the recess could be helpful. this public option thing, again, we'll have to wait until the fall to see what gets rammed through. i've talked to democrats in the senate who have said all along that the president would not get the public option the way that he initially conceived it and argued for it. >> interesting. what's coming up this sunday? >> we'll talk about the economy. we've got the mayors of new york and newark, bloomberg and booker, to talk about the economy's impact on some of the major cities around america, from what they're seeing and the overall obama agenda. we'll talk about foreign policy. for the first time the national security adviser general james jones talking about the backstory, how these two journalists, euna lee and laura ling got freed from north korea, the bill clinton diplomacy and where the administration goes next with the north korea. >> so many big stories in the past week. we look forward to watching you wrap them up.

see you sunday. david gregory in washington. join david on "meet the press." check your local times for listings. the employment report about to be released. we'll get the numbers live from the labor department in about -- becky? >> seven minute. >> seven minutes. very good. kkkkcccc

123450. check out shares of aig called higher once again. well above estimate of $1.67. the stock's already jumped about 75% over the past two sessions in what our david faber says is most likely a short squeeze. that company today with its earnings saying performance trends stabilized from the first quarter and it's still talking to potential buyers about a number of its other businesses. this is it. this is the final countdown. the jobs report is minutes away. we'll have the numbers live from the labor department. mr. evans? this is janice from onstar. i have received an automatic signal you've been in a front-end crash. do you need help? yeah. i'll contact emergency services and stay with you. you okay? yeah. onstar. standard for one year on 14 chevy models.

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we are just moments away from the release of the july employment report. futures have been in a tight range, understandably so, before the number. the consensus, minus about 328, 275. it's jumped all around. the range is minus 150 to minus 460. joe, there are few moment where the future of the economy comes into full relief. >> hangs in the balance. >> this is one of them. >> do you have a prediction? i don't. >> 300? >> we used to do that. it's too unpredictable. we would embarrass ourselves month after month. here it comes. we'll get ready for it.

cnbc's hampton pierce joins us live from the labor department with the numbers for july. >> reporter: minus 247,000, july nonfarm payrolls declined by 247,000. the unemployment rate is 9.4%. average hourly earnings up 0.2%. much better than the consensus forecast. it was looking for minus 275 and an unemployment rate of 9.7%. the last time we had this kind of a positive performance, even though it's still negative, this is the best monthly number since august of 2008, when we lost 175,000. also we had revisions in may and june. the net upward revision for the two months, 43,000 fewer jobs lost than previously reported. july job losses, by sectors, construction down 76,000. manufacturing down 52,000. retail trade, down 44,000. professional and business services, down 38,000.

job gains, education and health, 17,000. leisure and hospitality added 9,000 new jobs. the government added 7,000 new workers. all overall, 14.5 million persons are unemployed. long-term unemployment, those people out of work six months or longer increased by 584,000 in july to 5 million overall. an interesting anecdote from the auto industry. fewer auto parts workers were laid off on a seasonal basis because so many had already been laid off. as a result, the seasonally adjusted figure for that part of the auto industry actually now includes an increase of 28,000 workers. this is the 19th straight month that we've had payroll jobs lost. a record. 6.7 million jobs have been lost since the recession began. back to you. >> thank you, hampton. let's get to our panel. diane swonk, rick santelli up in maine, steve liesman with mimco

paul mcculley. we'll start with -- you know, since you didn't get an invite, diane, i'll start with you. let's at least -- >> i did. and dave actually e-mailed me in between and reiterated the invite for labor day. >> shamed into it. anyway, 240's pretty good, huh? >> i am -- i am absolutely wonderfully pleased. it's -- actually, with the increase in the income numbers as well. this is good news. i'm a little worried about the health and education components, which have been the shining stars, because we are hearing a lot of pink slips going out out there, specifically to teachers. i'm still going to hold my breath in that area. i know on the medical care side we're hearing a lot of layoffs in administration in hospitals right now because of the pinch they're feeling. that said, you know, i'll take anything we can get. this is good news. well, less bad news, and that's good news. stuff that would have been bad news in september is good news today. everything's relative. i'll take it. >> let's move down the list and

go to mark, who also hasn't gotten an invite. mark? >> and i didn't get e-mail either. >> oh, no. sorry! >> i haven't looked. i didn't turn on my blackberry yet. >> i have my blackberry. >> great report. what's encouraging is the revisions are moving in the right direction. if you go back 6, 12 months ago the revisions were worse. now the revisions are better. that's very positive. also average hourly earnings up 0.2 of a percent, very encouraging. it will be interesting to see why -- it looked like it dipped to 9.4%. that's encouraging. everything seems to be sticking to strictly loss. over 2 million in the first quarter, 1.3 million in the second. it look like we're on track to lose 750,000 in the third. i think by this next -- by next spring the job market will be stable. good news. >> all right. someone's -- okay, bob, we'll get to you and then rick. what do you think, bob?

>> well, i think the economy's turned. if you look at the pace of change, right, we've gone from down nearly 700,000, now down less than 250,000 and that pace of change should continue. so you can talk about, perhaps, some job growth in the fourth quarter. and i think it will turn out that the recession ended in the third quarter. >> very good. rick, what's going on? we can hear you. something caught your eye. >> reporter: well, you know, it's interesting because the knee-jerk reaction, many dismiss it. i think it gives you tremendous clues. the initial reaction was, two-year note yields, some of the back, you know, next year beyond euro dollar strips selling off. a major flattening going on. what does it mean when short maturities lead the charge higher when there's very much debate? the market is getting sensitive to any kind of data that might be on the better side, better than expected, trying to tighten its own spigot.

i think that's tremendously interesting. although not to dismiss at all maturity yields moved higher and stocks moved lower -- or stocks moved higher. dynamic to pay attention to because at some point good data will continue along with supply to bring higher interest rates. it didn't really -- wasn't a big dollar issue either. dollar was a little bit lower. but the curve is very fast. >> you guys want to hear another conspiracy theory, joe? >> yes. >> last night goldman revised its estimate -- >> yeah, 250. >> to 250. they were only off by 3,000. just missed it by 3,000. >> deutsche bank to minus 150 as well. they came in -- they kaetd the optimistic -- >> was that post the obama speech? >> no, it was before. >> now, let's get back to leen's lodge. you have john sylvia here now? >> yeah, i think he's the right guy to start with. you were impressed with the

number. >> very good. i'd like to thank my team for the 245 number. >> how did you miss by two? >> i don't know. >> who messed up at the shop? >> well, we'll name names later. but i think three things are key. broad based gain in terms of smaller decline in a lot of sector. second, not driven by the federal government numbers. >> only seven from the federal government. >> the third point i'd like to make, the work week, the average work week was the leading economic indicator improved. i think we are in economic recovery. >> i want to make a quick point which is it's not just one part of the number that is behind the optimism here. four things went in the right direction. the number was better than expected. the revisions were in the right direction. the work week was up. and earnings were better than expected. so i think there's reason to be optimistic. just to state the obvious for everybody on this entire panel in maine and everywhere else, nobody is happy with losing 247 but happier than 700,000. let's ask paul. your sense of the number and what it means for -- rick was talking about inflation concern.

automatically the fed should reverse course. that's it. we're done. i'm -- i'm sorry, rick, i'm exaggerating. i'm sorry. >> that's exactly how -- >> they'll react that way. >> we know that the fed's on hold for an extended period of time. but we know the next move is going to be up. so, therefore, the marketplace when it gets this type of data will ask traumatically. so that's the way to trade it. regardless of what you think the fed's going to do in the next six months. you trade it on the bear side. example. >> i want to give rick a chance to respond on that because i completely mischaracterized his remarks. >> reporter: you know what, mr. mcculley, i agree, that's why the knee-jerk reaction is so fascinating. the market is looking at the next move, even if it's not a long time away. it might put a bit of tightening pressure on the fed itself. as far as inflation, i don't even like to talk about it. i like to talk about higher prices. no matter how you slice it, the

dollar is not going to be a big beneficiary of good data either. things flight to safety and -- >> rick? >> reporter: yes. can i just ask you, it is impossible to take -- to decipher from the market's message what it expects. either it expects the fed to move tighter or it expects the fed to move too late. and both moves -- both expectations create a move higher in yield, right? >> yeah, i think that's a good point. that's why i think i'd rather watch the market, not even think about what the fed should do, will do or might do. >> it's better for all of us if you do that. >> i think so, too. >> i don't know who to direct it to. does this mean -- could we go back -- could we go back down, is that possible? and why is 10% assumed to be something we're going to hit if we -- if it went down to 9.4%? >> you know -- >> i think -- >> i think, joe, the structural challenges, in items of the

unemployment rate, what's the participation rate? if you have a lot of people drop out, that keeps the unemployment rate low. but i would build upon, what i think we're seeing now, is that the consumer is improving in terms of the job outlook and the average hourly earnings. this is better for credit. >> why do we need to go to ten? >> no need to go to ten. >> i think we -- besaw a spike in the unemployment rate in the last couple of months in part because of all the -- ul the students graduated from college and didn't get job. the labor force grew and seasonally that wasn't expected. the spike in the unemployment rate was a surprise. this is returning more to what people were expecting before those big spikes. so, you know, with all that said, i think you have to put it into intaish into more reasonable context. >> if question go back six months and say we're going to debate about whether or not we should have fiscal stimulus, whether or not you should be in the business of trying to stabilize the situation in the banking sector f you said six months ago jobs are falling at

650,000, 700,000 pace, if by july we end up in a situation where payrolls are falling, 247, the unemployment rate has stopped going up, how would you give somebody a grade in that regard? i just don't come up with d-minus. >> joe? >> yes. >> you haven't commented on the amazing box wes have going on here. we have three in the box down here. if you do the math, right, we can do nine. nine times three's 27. we could break new records in terms of boxes. but i just want to point out -- >> the show's -- >> -- the psychology of this is significant. remember the psychology on the downside, panic psychology. it was fire unless you have a really good reason to hold onto somebody. the psychology that could happen here, at the very least, is that a lot of people don't get fired from a number like this. i mean, i think -- i think hiring's a different story. but i think there's an important psychological effect because the

front page story tomorrow in the papers is going to be, unemployment rate dips for first time in -- i forget -- i don't know what the number is. that's going to be important. people will read tomorrow. it will have an effect on employers and employees. >> you should never underestimate the power of animal spirits. >> that's what it's about. >> and turning animal spirits is the key issue right now. >> stu, it is the best month since august. doi have another question for paul. if we all agree that the market -- >> i lost my connection here. can you repeat the question for me? >> hang on. >> can you hear me? >> no. he's going to -- >> i got you now. yeah. >> if we all agree that the stocks have discounted some degree of economic stabilization, have they put their finger on how -- what the magnitude of that is going to be? is there still room to be disappointed even though things are getting better? >> i think there is room to be disappointed. the big rally for risk assets since march has all been about unwinding the risk of an armageddon scenario.

battening down that fat tail of an armageddon scenario. now the marketplace has to consider the character of the recovery. i think it would be premature at a minimum, and maybe just plain wrong, to start discounting a fat tail of a boom. so if the marketplace wants to go that far, then get me off the train. >> wow. no one's talking. >> quick update. the dollar's getting a bit of a bid here, especially against the yen at the moment. >> that's kind of interesting. if we did, steve, or you guys up there that had the double dippers up there, would we have to have a worse number than this, like in subsequent months, down over 300,000, to get -- >> i don't think so, joe. i think the double dip is based on -- i call it failure of imagination but maybe i'm wrong here. what you heard earlier -- i forget, david gregory was making that interesting point, that the

problem out there is that people don't see how growth returns once the government stimulus runs out. john, tell me if i'm wrong here, productivity growth plus popular growth equals gdp growth. that rule of economics has not been repealed. when the government stimulus runs out, if we haven't messed things up too badly, the natural forces will and can take over. >> that's right. what is the fed's strategy? do they execute the same time as the federal government stimulus runs out? that's where you get the second -- and then regulation that's put in place, taxes are put in place, does it create a pace of economic growth more on the downside than what people -- >> and you're also worried about deficits. >> that's right. >> does that crimp growth? >> it will crimp growth if it's perceived the chinese, japanese, asian investors aren't willing to activate that at the interest rates. >> let me put in a word for the

double dip. i mean, you know, the double dip has some validity to it. i mean,i it's going easy to go from big negatives to zero because layoffs will end, particularly in manufacturering and construction. but we'll be at key inflexion point where we have to see hiring kick in. it's not obvious that businesses will go from firing people to hiring people. at least not quickly. so if that doesn't happen relatively smoothly and the fiscal and monetary stimulus fades, then you can have a double dip scenario. you can't completely dismiss that. in fact, to the point where policymakers have to remain very vigilant, and if the economy doesn't seem to be engaging, they'll have to provide more help. >> okay. steve, we -- >> i'd like to echo what mark said there. >> hurry up, paul. >> at this stage of the recovery it's all about addition by elimination of subtraction. once you get through that phase, you actually need to have addition outright, and there is a significant probability that we do have very sluggish growth

once we get through this sunny side of the inventory cycle. i think mark's point is very well made. >> and i agree 100%. we can't dismiss the risk still going forward. we're very jubilant and i'm glad to see these numbers. but glad to sew a smaller decline and less bad. just not good. >> we're saying good-bye to leen's lodge for good. we won't see you any more, steve. john, you guys can -- >> we'll be here all day. >> you can all go change into your togas now that you won't be on camera. >> we'll be here all day, joe. >> we know -- we've seen pictures. the branch around -- and then they go crazy. >> oh, really? >> black nikes? >> don't touch me. >> yeah. >> don't touch. you just prove him right if you touch me. >> toga! toga! i guess we're saying good-bye to mark and diane. this parting is such sweet sorrow. bob, you'll be here. rick, good to see you. thanks for pointing out -- even the dollar up a little bit on

that. thanks to all, to everyone and all. we're going to take a quick break. we've got more market reaction, though, including art cashin's take on today's report. as we head to the break let's take a look at the reaction of the future. a big jump there as the market got much better than expected news. still a loss, but much smaller loss than had been expected.

we got the jobs number in

the books, minus 247,000, better than people expected. we'll get more reaction. art cashin and his words of wis come after a break. getting a bulletin there has been no final settlement reached yet in the u.s. tax evasion dispute, guys, with ubs. that's coming from an attorney with the department of justice. more on that in a minute. first, though, check on the dollar. which has actually ticked up, guys, even though the news regarding the jobs market has been good. >> breakaway between dollar stock correlation? >> if the economy's doing well, we'll -- better than everyone else, we should go up. >> we'll talk to art cashin in a moment. you think the jobs report is big? check out next week's lineup. "squawk" icon and rebel mohamed el erian, nouri roubini, former senate majority leader bill frist, hedge fund legend michael

stein heart,

okay. just got the jobs number for july. in case you missed it, it was minus 247. the 19th straight month we've

had jobs decline in this country, but the best month since august. and one of the good things, the employment rate did go down. wasn't largely dependent on the government creating jobs. wheel ask art cashin what he thinks. director of floor operations at ubs. art, your take? >> well, i think it's good. first of all, it shows that our dear friend dennis probably got it right, the president did get a peek at things. that's why he was so upbeat in comments about jobs last night. sustainability is my concern. i think the market will be happy with it, but we've got some important resistance to get through here. 7,000 and 11. >> i was going to ask you whether or not resistance has moved up at all because of this. >> no, you can punch through this resistance at the 1015, 1019, i would say. but i think it's very important to see how they act when they

get to 1007 to 1011. if they hit it and fall backward, you might get some accelerated selling. people think that the market is clearly over bought. you see they're having problem with resistance here. they think the fact that we haven't had a pullback yet, as joe and i discussed, tends to be the guys who missed the train as it was pulling out. so the mildest downtick, they buy into. that's why we've had a lateral correction rather than a pullback. >> the jobs number does not mean the market is not as over-bought as some say? >> no. i don't think at all. and i think you have to be very careful with things like initial unemployment claims and nonfarm payrolls. nonfarm payrolls are going down, people are still getting laid off. they're not getting jobs. you know, you can have a factory with 100 people and you lay off people and then you lay our another 20.

even though you're laying off a smaller and smaller number, nobody is getting a job. >> the dollar back in business or were we just exhausted of all the weak snns. >> no, i think the dollar is probably ready for a bounce here. that will be another headwind for the stock market. >> art, thank you very much. have a good weekend. >> enjoy your ice cubes. when we come back we'll have some final thoughts from our guest host. meantime, check out a look at gold prices on our way to break. "squawk on the street" will be right back. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 i want everything right where i can find it. tdd#: 1-800-345-2550 anything that makes trading easier. tdd#: 1-800-345-2550 i want to be right in the middle of the action-- tdd#: 1-800-345-2550 you know-- i have to see what's going on. tdd#: 1-800-345-2550 and when i pull the trigger... tdd#: 1-800-345-2550 ...i've got to get the best price out there. tdd#: 1-800-345-2550 (announcer) try the new schwab.com tdd#: 1-800-345-2550 for yourself. tdd#: 1-800-345-2550 call 1-888-4schwab tdd#: 1-800-345-2550 or visit schwab.com/trader today. tdd#: 1-800-345-2550 'course a trade doesn't always work out my way. tdd#: 1-800-345-2550 but when it does... tdd#: 1-800-345-2550 ...man... do i love that feeling.

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bob, after this jobs number, what do you think? >> i think you can see that three months ago we started the depression off the payroll. today we can say recession ended. now in the business of debating what kind of recovery we're going to get. my sense going into the number was 3 1/2% above what consensus is saying. there's a reasonable second half number. and i still think that's right. i can breathe a little easier because the number looks good. >> is it a true, hard number or do you worry that a lot of this is the thing like the cash for clunkers and the stimulus? >> there are wild seasonal issues in all the numbers. but the fact of the matter is,

if you look at the last eight months, you know, down 700,000, now we're talking about down 250,000, there's an unambiguous trend there. the trend is positive, even though the numbers remain negative. so i think, you know, good news. straightforwardly. >> bob, thank you very much. it's been great having you here today. again, for anybody who hasn't heard it yet. the jobs number down 247,000. upward revisions from the previous month. the unemployment rate ticking down. well below expectations as well. this is the best monthly number since august 2008. again, you're talking at a lot of job losses but that's what the market is digesting today. that's it for us. make sure you join us on monday. "squawk on the street" is next. this is cnbc.com news now. >> stock of rebounding after a better than expected jobs report. the economy lost 247,000 nonfarm jobs. the unemployment rate fell to 9.4%. aig shares poised to add nearly

75% gain over the past two days after quarterly earnings came in well above estimate. retailer target will build and manage target.com remember site on its own in 2011. it currently has a website partnership with amazon.com. that's cnbc.com news now. i'm courtney reagan. live from the financial capital of the world, this is "squawk on the street." good morning, everybody. i'm mark haines. stocks going to pop at the open. the monthly jobs report, as you've been hearing, better than expected. it is the 19th straight month of job losses, but the smallest loss in any month since last august. >> and good morning, everybody. i'm erin burnett. the numbers, let's gate straight to them. employers cut 247,000 jobs in july. that is based on a survey of employers. the unemployment rate based on individuals across the country who were surveyed, perhaps even

more important, it actually dropped to 2 attorney 4%. it was 9.5% the month before. we did see incredibly tiny, mark, incredibly tiny, but still there, we did see .1 improvement in the average workweek. >> okay. >> you've got to start somewhere. >> take what we can get. futures right now looking pretty good. up 8.60. that will change in just a moment. and fair value, minus a half, so add them together, we're looking at a 50-point drive in the dow at the open p. >> so let's get more on the jobs report. senior economics reporter steve liesman. wow, he sure does have a good job, speaking of jobs. okay. steve, what are you hearing? >> first off, i'd like to point out that somebody has to do this, okay, erin. i just happen to be the guy who was picked for this. i want to go inside the numbers here, for a long time,