let's get you up to speed on this friday morning. the july report is just 150 minutes away. the dow jones industrial survey says economy likely added about 95,000 jobs last month. that would be slightly better than the 75,000 a month average from april through june. but it is still below the 226,000 average in the first three months the year. the unemployment rate is expected to stay at 8.2%. in in your opinion spanish ten year government bond yields heading higher once again today testing their euro era highs. this comes after ecb president mario draghi made clear any support for the troubled country would not be forthcoming in the next few weeks. knight capital is fighting for its survival this morning. the $440 million trading loss was caused by that software glitch earlier this week. wiped out much of the company's capital. shares plunged 80% in the last two days. the firm is seek new funding.

many of the company's biggest customers have stopped routing orders through commit. we'll talk to one of knight's competitors in the next hour. ron kruszewski. >> let's talk about corporate buzz. mcgraw-hill taking bids for existed case capital. two companies have put in bids. bank of america in talks with fannie mae. they are fighting over soured mortgages that fannie wants the bank to buy back. and the london while was urged to put higher values. the "wall street journal" is saying the firm's conclusion is based on a series of emails and vice communications from back in late march and april as losses on trader's bullish credit market bets had mounted they

were saying push the values higher. mr. kernen? >> andrew, few stocks to watch early this morning. kraft foods posted higher than expected second quarter revenues. the company is leaving its full year target unchanged plans to reinvest any upside back in the business. link linkedin shares rising. activision blizzard setting expectations of strong sales from a newly launched diablo 3 game will offset the drop in war craft franchise. let's get a check on the markets. on this friday morning ahead of the jobs report we're looking at the futures well above fair value up about 76 points. if we watch what happened yesterday in the market activity there was pressure all day long. stocks only ending down about 90 point. at this point if you open right now where we are get back most of those loss with the open this

morning if we continue at this pace. that jobs report at 8:30 could change just about anything. we'll be watching that throughout the day. let's take a look at oil prices. oil prices right now up by just over a dollar. 88.18 as wti crude -- i should have pointed out for the dow, the s&p 500 and nasdaq they are all on pace for their worst week in nine weeks. doesn't feel it's been that bad of a week but we'll see how things end up closing today. take a look at the ten year note. yield at this point is 1.515% back above 1.5. the dollar at this hour after the news we heard yesterday we've been watching the euro very closely the dollar is down against euro at 1.2237. gold prices this morning are up about $6.70, 1,597 an ounce. >> andrew, mr. draghi signaled that the bank in what would normally actually be a marked

departure from current policy, so we did say yeah i'm going to do this. but it didn't -- he didn't say i'm doing it today. >> time still saying this is incrementally moving the right way. 90 point here. we had gone up 500. we'll be up today. you're very cynical about this. which is fine april and you're worried about it. but i'm worried that, you know, have you seen batman? but the first one or the second one? some men just like to watch the world burn and i think you took a little bit too much satisfaction in it not being enough yesterday. >> eventually we'll get there. buckle in and -- get comfortable because we will -- they will eventually get there but a long -- >> was there something that came out yesterday where they said he

didn't -- that the individual countries didn't need to go to the esff. >> there were wires that said that. >> i think those wires were wrong. end in fact they do need to go and so that was -- >> there were wires that first said they did need to do it. then there were wires that said they didn't. i think that was the contradiction. that's a good hair cut. >> thank you. >> you do better with short hair. >> you got a nice hair cut too. >> got one. >> happy about it? i think it's good. >> i'm not sure which way to go right now. there's two spots right here and here that i'm doing a comb over. i never had to do a comb over in my entire life nine don't consider that a comb over. >> i think you're fine. >> certain times if it's not just right you can see through to it the scalp.

>> let's go to the land of london's. i don't know what kind of hair doctors they have over there. kelly evans is standing by in olympic. kelly, help us here. >> i'm happy to help, andrew. let's tell you what's been happening overnight because then i'm going off to cheer on the women's team in the football soccer match later. first the europe stoxx 600 is better than 1%. we've been slowly building this position throughout the morning. we started off just marginally higher moving up led by bank stocks the strength is propelling markets higher after that initial negative reaction to temp cb decision and press conference yesterday. let's look what's been happening across the region. markets leading the gains. ibex 35 in spain is up 1.7%. ftse mib up 3% in italy. the xetra dax up 1.65 are%.

ftse 100 better than 1%. we'll look at the bank stocks. over here whether spain's bbva or banco santander, investors are digging through what the ecb may have inned at coming down the pike saying yesterday if it wasn't what they hoped for perhaps it was still a step tinge right direction. maybe it's good enough for today's trading session. bond a bit of a cautionary tone this morning. spain initially superat 7.3% on the ten year which itself should have told you how weak that initial market reaction is. it's down to 7.13%. unsustainablely high. better picture as we move to the yield curve as we come back to the short end where the ecb will

be focusing on its bond buying efforts. 4.3% is the yield on two year. we were over 7% here only a few weeks ago. take a look at currencies before i hand it back to you because we see an indicated risk supported environment. aussie/dollar up half a percent against the u.s. euro/dollar is also up 1.2238. we've been building the position. we koend friday and this week on a better note than when it started although as people look ahead to the resolution of europe's debt crisis there's no clear fix in sight. >> kelly, we were talking about some other stuff. everything looks a bit rosier today even though the yields aren't rosier. i don't understand. do you? did they win a medal somewhere? >> joe, if anything put it down

the fact that yesterday we saw that real negative reaction what the ecb was saying. this morning we had a couple of guests saying if you forgot mario draghi's comments a week, positive reaction and then negative yesterday, you could see a clearer line in the improvement, the tone they think generally better speaking than it was initially. >> policy wise there has bean shift in where the ecb was three weeks ago versus where they are today. almost like three steps forward, two steps back. you got a little bit -- >> joe, look we've seen this with the ecb before, whether it was the first-round ever securities market purchased, whether it was the short term loans. they can buy a quarter, two quarters of time. what they haven't done is do anything to resolve the problem longer term is that there's no printing press for fiscal

integration. if they can convince people they've taken enough of a half stepper happens they can get a quarter or more of positive risk sentiment. >> to go from saying that german rhetoric, there's no way we'll ever let the central bank buy any sovereign debt to go from that where we are now it seems like we're closer to them actually being able to do that than we were three weeks ago. he got a little bit excited. and people -- i don't know. he talked about more than he could deliver probably but it does look like they are slowly going to get to that point. >> remember yesterday the way this was initially being sort of framed was that, you know, draghi basically called his bluff. german was standing in the way of the central bank chief. today they are waking up and saying it's isolated here in the corner and refusing to act and there's more political will to

do those measures. i would just reiterate the broader outlook here, long, longer term still is quite worrisome. >> longer term we're all dead. i know you're 26. you'll see eventually. yeah. all right. someone said that once. long term we're all dead. no, no. we had someone on the air who said that. it was keynesian thing. >> i like it when people say valuations like when facebook came out valuations are discounted all the way into the here after. you have to believe in the after life. i think at $38 that's what you're talking about. >> keynesian said that >> so don't worry about blowing all your cash right now. >> i didn't know you were a keynesian. >> yeah. >> let's talk about a stock that you might have to wait a while

for. facebook is falling now to new lows since going public back in may. look at this chart. started at $38 a share. facebook is now under 20 bucks. nearly 50% decline. so, course the question is what is behind this drop and how does mark zuckerberg make it better. thank you for waking up early. this is like a -- i would say it's a roller coaster except it's a roller coaster that only goes down. we always have to wait for to it go up again. when if ever? what's happening in >> some of it will be timing in addition to question investors have about the business overall and i think as you look forward to the next few weeks you have quite a few lockups coming. >> lockups in terms of employees and those who can sell shares? >> if you look to the number of shares outstanding now that are floated it's 400 million.

that number will increase to a billion four. >> we knew this. we always knew these shares would be sold. what gives now? >> there's a catalyst between when they became public and the lockups were going to expire that they thought would actually help the stock. the last quarter's earnings. they were good but not good enough to change anyone's thoughts on the overall business. >> what do you make of this release or disclosure that 85 million users who are supposed are there really aren't there. that these are people putting up their pets, these are spam bots, these something but not real people. >> with the exception of the spam bots, the pets are still an engagement. even separate that you're still talking about close to a billion users. the challenge is to drive higher usage. it's clear enough even without the idea of the bots. >> there's a blog out there that seemed to be getting a lot of buzz about a user who tried to

buy ads. liesman was buying ads for his concert, somebody else is buying ads and he did some all gorithm were not real paid. they were being paid to click on these things or type of people he wanted clicking on his ads. did you see this? >> i didn't see the blog, but that clearly is a problem except i would say that within facebook, when you look at linkedin earnings there's a tremendous amount of value around sort of the intangibles, developers using the platform. i think that longer term investors will want to give them some credit for that. right now there's no rush to do that ahead of the lockups ahead of the challenges. >> what is long term? we said long term we're all

dead. >> you want to see some of the selling from the lockup start to happen to at least gauge it. you don't need to wait for the whole six months. >> you get a sense of how much pressure it will bring? >> right now you can argue that valuation is actually starting to look compelling assuming margins normalize in 2013. when you step back and you look at some of the user metric trends there are some worries. a lot of the 18 to 24 year olds online are quickly moving away. those numbers are showing decline now year-over-year. moving to mobile but they still don't modify mobile. >> $34 target. 12 month target. >> 12, 18 months. >> you get there how? >> we discount back probably about five years plus a terminal. i think when we look at where facebook trades now it's very expensive on the basis of revenues. if you're looking on the basis of earns it's about 25 times.

that's a fraction of where they've been. facebook's overall audience size is still much larger. there are a lot of areas that it stand to go into that are -- >> do you believe there's going to be a second coming for facebook. they will either discover mobile in a different way or discover another technology. we were talking about facebook as if it was a drug company. there has to be a break through. >> i think so. they have to embark on a new form of advertising and show that the idea of word-of-mouth, social referral is helpful. not just to brands but also ultimately to users and how they use the platform. will they ultimately use facebook to pull information from? those are the ideas that facebook stands to really -- those questions facebook stands to answer better than anyone else. >> thank you. >> it's almost been 24 hours since we watched draghi. it's hard to understand what he's saying if he's not speaking

english. but 24 hours later, i just want to let you know what some people -- how you can re-interpret. >> read the tea leaves. >> "financial times," draghi's bold move in the euro chess game. he launched a bold gamut in the game of chess with market and leaders. in a significant step for the ecb he left no doubt that the central bank considers it squarely within its mandate to do this. and as a result he made you want clear that the ecb is ready to stop. investors, this is you, expecting immediate intervention where nonplus by the conditional terms of the offer but you, andrew ross sorkin, should not underestimate the adroitness of mr. draghi's maneuver. >> andrew is right there will be some volatility. >> the hardest political foot work involved in dancing around german sensibilities.

can you believe -- you would not call that a bold gamut. >> i would not. but we can all hold hands and claim a big win. >> i'm just saying 24 hours later people had different opinions as to what this -- prior to this -- then you any it's the ft and you're hoping they can stay in business. still to come on squawk, a casualty in the knight trading debacle. first what wall street wants to see in today's jobs report. jobs. stay tuned. one golden crown. come on frank how long have we known each other? go to e-trade. they got killer tools man. they'll help you nail a retirement plan that's fierce. two golden crowns. you realize the odds of winning are the same as being mauled by a polar bear and a regular bear in the same day? frank! oh wow, you didn't win? i wanna show you something... it's my shocked face. [ gasps ] ♪ [ male announcer ] get a retirement plan that works at e-trade.

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welcome back. we're counting down to the july jobs report at 8:00 tirnl. joining us is steven stanley. tom lee is the chief executive analyst. steven let's start things with you. what number your expecting and what would really catch you by surprise, a number that was higher than that or a number that was lower? >> good morning, becky.

i'm looking for 85,000, increase in payroll. very similar to the last three months. you know, frankly i would be surprised at any big divergence in any direction but particularly surprised if we see a big acceleration. firms have stoepd the sidelines. tremendous amount of uncertainty ahead of the election not the fiscal cliff but fiscal policy, regulatory policy. a lot of question marks will be answered in november. in the meantime firms have decided to rein in hair horns. >> you've been watching, saying all these issues out there, the fiscal cliff, the election those aren't things we'll get any answers to any time soon. nothing to spur growth ahead of that? >> we'll continue to slog around. we've had this subpar first half the year. i think third quarter will be more of the same and into november. april lot of people are afraid we'll decelerate from here to the end the year because of the

fiscal cliff. i look at it dumptly. if the election provides clarity maybe things can pick up after that. the summer will be pretty blah. >> tom, do you agree? >> i mean i think there's a lot of head wind right now coming from europe. there has been a slow down in manufacturing. i think construction activity has been a source of growth and i think that's maybe an area of surprise in this jobs report today. >> what number are you looking for today? >> we're looking for 95,000. >> right in line. >> yeah. this is a month where in june we saw the average work week increase. overall it was a better, potentially better sort of spin on the print if you look at the increased hours to work. >> i get all these conflicting reports, people say that the revenue numbers if you look at them, the richmond fed if you look at another component from two major cities show revenue numbers are starting to drop and that's a key leading indicator would indicate lousy job growth.

do you think that's a better indicator or the longer work week is a better indicator. >> work week is a really important number because as you know a tenth of an hour is a equivalent of firms hiring 320,000 people. we had a tenth of an hour increase. hopefully we don't reverse it this month. absolutely there's slowing coming from europe. yeah. >> steven, we spoke with the ceo of cargill this week. in their production lines they have not added new workers. we asked what would it take to add more workers, he said if there was demand, push from consumers they would hire immediately. it's this chicken and egg scenario what comes first and what spurs that demand if you're still looking at 8.2% unemployment. >> traditionally you expect demand to pick up first. for whatever reason people start

to spend more, take on a little more debt and, you know, the employment typically comes later. that's what the text books would tell you. that i think is one of the concerning thing over the last few months. i wasn't that surprised that want businesses got more conservative than we saw a little bit of cooling in hiring and investment. what's been disturbing is that consumer spending has pulled back. consumers are also becoming a little more cautious over the last several months. so, you know, unfortunately, tom is right the housing sector is one area that's outperforming but everything else to me seems like we're kind of, as bernanke said we're stuck in the mud. >> tom, warren buffett has spoken with us too and he said the economy would turn when housing turned theology the last time we spoke with him, he said it's crazy, housing is turning and the rest is not picking up. which is surprising. >> that's right. i think part of it is because we're transitioning from

manufacturing, pulling so much growth last year to sort of being a drag and now construction is sort of adding. but the second half there are some tail wind. if you like at kay schiller, home prices are up 10% in the last three months. that's $1.6 trillion of wealth created when you build a home -- what we see in july job numbers. finally i think, overall we're going to get the benefit of lower gasoline. that's a tail wind. i don't think we need to write off the rest the year. >> you're in agreement we should be looking between 85 and 90,000. not spectacular but not a huge disappointment. >> that's right. >> tom thank you very much. >> when we come back our jobs conversation just getting start this morning. we're going to talk to a leading search firm. why etf investors could be caught in a knight trading

deabout a cal. stay tuned for that and a lot more.

♪ working for a living ♪ working ♪ working for a living ♪ working for a living ♪ i'm kicking what they are giving because i'm work forge a living ♪ good morning and welcome back to "squawk box" on cnbc i'm joe kernen along with becky quick and andrew ross sorkin. the dow jones survey says the economy likely added 95,000 jobs last month. that would be slightly better than the 75,000 a month average from april through june but it's well below where we need to be and well below the 226,000 average for the first tee months the year.

the unemployment rate is expected to stay at 8.2%. why we tell you 95 and 8.2 so we can compare the actual numbers. . >> that's what the market will move on. on expectations. >> i don't have a high degree of confidence in either of those. >> no. either of those numbers. >> and given. adp last month was way overstated. this month was a good number but people discounted that. normally if it's way off one month it should be closer. >> people are looking at a wide range. if it's below 50 you signal a disaster. if it's above 150 it's a very strong surprise to the upside. wide range. >> etf research provider called index universe warning investors in liquid etfs they might get hurt by this knight debacle. it's the biggest trade fund market maker. it steps in to make sure these

etfs are priced in accordance with demand and provides liquidity. yesterday the average spread for the 549 etfs for which knight acts as the market maker wideened three fold. more onni knight trading froe f tausche. toyota is back on top. toyota posted its largest quarterly operating profit in four years. it also raised 2012 global sales target. >> it's what happened after they got back on track after the earthquake. slowed things down. >> accelerator sticking to the floor. the mats. >> that little thing too. let's get a check on the markets this morning. you'll see futures are indicated sharply higher this morning. last i checked it was -- at this point dow futures are up 93. the dow was down by 90 points yesterday. you look at the s&p, the dow and

nasdaq they are on track for their worst week in nine weeks but we'll see what happens today after we get that jobs report. also take a look at oil prices. they are high are today. last check up bay dollar. trading by 1.118. ten year note yield is back to 1.5%. dollar has been a little weaker against the euro but, again, trading in that same range we saw yesterday. 1.2264 is where the euro stands now. dollar yen is at 1.26. gold prices are slightly hire. up by $7.80. >> we're on the job hunt this morning. this is kind of a bit of a different jobs. joining us now clark murphy, the ceo of the executive search firm russell reynolds associates. good morning. you have a different sort of

look inside the way corporations are hiring. before we get into the boardroom and suite do you have any sense where hiring is? >> hiring is uncertain at best and not going up in terms of what people feel is going to happen, whether the c suite or what they are looking. c suite, long term, the job market is tough. >> which industries right now do you see any opportunity for? >> huge opportunity in energy. we're very busy there globally. technology not surprising will come fwikt. digital transformation across industries is creating tremendous executive suite hiring and transformation. health care for sure. particularly med tech, life sciences. >> do people don't on corporate boards any more? >> yes.

ceos are not intimidated. great operators want to stay involved and b, they can have an impact on companies. it's an uncertain world. okay. a puddly changing. they got to adapt quickly. great operators want to help companies succeed. >> when you talk about the c suite where are you getting these people from? how much more international is the business in terms of the pool that you end up looking at? >> we've been talking about it for a decade. i literally just came back from china a couple of days ago and was in europe for two weeks before that. it's completely global. we're finie ing australians working. for the c suite particularly as they adapt to different environments completely global. >> is there a higher rate that work out or lower rate that it works out. >> atheist more about the risk people are willing to take and what parts of the world getting information go to europe particularly southern europe

right now to run companies is pretty tough. >> compensation? what's going on? >> compensation, longer term structure, compensation on a relative basis is still higher than other parts of the world. >> is it coming down? >> no. it's changing the mix from very little, relative amounts of cash to lots of issues, long term stores performance of the company, performance of the shares. >> and less in terms of parachute? >> parachutes. >> gone? >> no parachutes. >> parachutes gone. good to know. you want to guess. got a number? >> i would say it's more like 80 to 90 not 85 to 95. >> we'll see how that turns out. if you have any comments or questions about anything you see here on squawk e-mail us. knightmare on wall street. shares trading down. we'll ask whether a buyer will dome the rescue next.

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>> welcome back everybody. those u.s. equity futures are indicated sharply higher ahead of the jobs future. dew futures are up by 90 points. what happens at 8:00 is going set the attorney the day. that jobs report is the key. >> we've been talking about it all morning knight shares plunging. the firm is seek new funding. kayla tausche is joining us. >> it was just yesterday that knight actually disclosed how big the loss would be, $440 million which now with its market gap in the $200 million has stwoebld size and double of what the firm is worth right

now. some analysts say it could affect $540 million. it takes into account its trading technology which is proprietary to knight we maid it capture a quarter of the trading retail. where we are right now is full auction of the company kicked off last night. sander o'neal is leading it directly. there are reports of involvement by goldman sachs potentially assisting in the advisory effort. my sources say their role is unclear. any bank that is potentially participating in this auction can't also be an advisor in a sale as it work out like this. goldman, jpmorgan, which also incidentally was bidding on mf global during its final days as well, maybe bank of america could be banks that participate. this is a time of intense regulatory scrutiny for the bank. do you want to pick up a firm

where you don't have enough time to do a due diligence on a larger loss or trading glitch that can't be fixed in the near future. my sources say a more faceable transaction to get done ahead of the weekend and over the weekend is a sale to citadel. anything that would happen would be a majority stake because if you're covering a loins your price tag that's going to be over $200 million. no way that the current knight management team can retain control in whatever happens and my sources say it might make to it the weekend but possible it couldn't make it through the weekend. >> one thing i'll say is that the company stepped up right away and told the amount of losses and said it's nobody else's fault which is something we've not seen in all the other problems. >> cruelle eslest irony situati

knight was one of the most vocal voices when it lost money making facebook trades and said it lost $35 million which hit the stock at 8% loss on that disclo our. nasdaq because of securities loss was limited to having to pay $30 million which was a tiny fraction of what firms lost. knight because it's not insulated by those laws will be on the hook for the entire thing. >> to see the difference between how these things break down. not that you shouldn't be liable but the idea that the nasdaq and other places have not been liable for mistakes they caused. >> just the idea within three months you could have two giant glitches that take, sap the investor confidence out of the system. we haven't seen something like this since the flash crash. now all of these brokerage firms are routing their trades through other firms. their trading is thin and you

wonder how they can keep up the momentum. the fact investors don't feel comfortable trading on certain platforms any more. it's very hard. >> how easy would it to buy it. >> there's some speculation. the head of citadel is traveling and difficult to reach a deal in a short amount of time. there's the interest of course. hasn't been an easy go for citadel. they had to sell off their investment bank. >> what about jpmorgan, the consummate rescuer? you've heard that name. >> we've heard that name. i heard that name. i think they would be remiss not participate when one of these marquise assets is on the market for cheap. right now the regulatory risk could prove to be too hard. jpmorgan is a lender to knight. do you then run into a conflict of interest. this is something it ran into at mf global.

if you're clearing trades. potentially pulling credit lines which of course we should say we don't know whether that's happening right now and joyce wouldn't comment yesterday. he had an interesting answer. he said my general counsel wouldn't want me to answer that. that causes a little bit of a question to couldn't. company be lending and bidding. how does that work and certainly we should get an answer very shortly. >> kay lashing thank you very much. >> by the way we'll talk to one of knight's competitors in the next hour. ron kruszewski. >> a ceo house call. we'll faulk big pharma. cigna's ceo will be talking health care and a lot more when we return. [ female announcer ] e-trade was founded on the simple belief

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if you're going to do something. make it matter. welcome back, everybody. in our headlines mexico making the biggest one day purchase of u.s. corn in more than two decades. this is the first clear sign of global anxiety or the crop. mexico is the number two importer of u.s. corn after japan. corn prices up more than 17% in the last month and we just had the ceo of cargill on who said this is exactly what would exacerbate the situation. if you have people hoarding, countries hoarding, we could survive the 3 million bushel short fall that's expected but if people start hoarding, countries start hoarding that's what would make a bad situation even worse. >> can we use natural gas

instead of ethanol? >> i think since natural gas plummeted now. new can't eat natural gas. ceo is shouldn't be the farmers. >> woo-wee. >> wait until you get older and the control aspect of everything. >> you told me about this. >> wow. >> you'll be walking along like whoa! you would never and might be right at a person's desk. >> what is wrong with you? >> yeah. gets much more difficult. >> i'm never going to believe that. >> that's a joke about once you turn 50, three things you can't trust. >> that's exactly what popped in my head. but the cargill ceo's point is shouldn't be simply the farmers bearing the brunt of this shortage. you shouldn't have the same mandates exist for the amount of ethanol that needs to go in the gasoline requirements, those should be eased as well so everybody shares the burden. >> there are malthusians that

e extrapolate global population and you wonder how long we'll be throwing all that corn -- >> i'm still into the comments. >> you have no idea. you're young, "i'm in control of everything" and just wait until you're sleeping eight hours at night, oh, you fall asleep, wake up, everything -- there's a lot facing you. it's okay. >> i wish i was sleeping eight hours a night. okay, beck. insurer sig in a cigna rai earnings forecasts for this year. joining us with more is david corda cordani, ceo of cigna. how have you been able to buck the trend by this? >> good morning, becky. we've had a strategy focusing on

key markets inside and outside the u.s. second to partner with customers and decisions and three to invest in new business over the three years. we've not ebbed and flowed on investments. that's boding well for us because we're retaining clients, expanding relationships and adding new relationships to the company. >> are these new companies, new individuals? >> in the united states today we primarily sell to corporations, outside the u.s., corporations and individuals. we're adding corporation relationships in the u.s., and bringing solutions to their employees and growing with individuals outside the u.s. we're really targeting in the u.s. those employer who value incentive and engagement programs to focus on health improvement, productivity improvement and of course making sure the programs are there for individuals dealing with chronic care and acute care and more employers are looking for ways to control costs and realizing

that improving health and engaging employees is a better means to do so. >> we have heard that from a lot of employers who have talked about how they get the employees to buy in on this but when you're fighting against trends like an 8.2% unemployment, how does that impact and do you feel it at all? we've got a jobs number coming up in just about an hour and a half's time. >> sure, the employment landscape here in the u.s., we absolutely all feel that and we need to improve the employment base. cigna is growing our employment base. we've been able to overcome the revenue challenges and still grow. outside the u.s. we're positioned in about 30 different countries and jurisdictions and positioned well in some of the faster growing economies outside the u.s. and bringing solutions forward for the growing middle class, that's serving us well outside the u.s., revenues growing 50 15% to 20% as well. >> outside the u.s., where are some of the fastest growing

countries, developed nations, bik programs? >> we have two major, one is corporations and governmental organizations as they deploy executives around the world so that's really global. the individual problems, our largest market is south korea, our fastest market is china. we've been selling products and services in china for ten years. taiwan, hong kong, indonesia have been strong growth markets and recently just opened up turkey and we're entering india. we have a portfolio at different stages which is serving us well also. >> i guess these are different products than you sell in the united states? what kind of a policy do you sell in china? >> very different products. the direct individual products were quite sophisticated in terms of supplementing the solutions that the government brings forward so all of these countries have government-sponsored programs that have been in place for some time but they leave gaps and holes and as the growing middle class seeks to fill those gaps

and get more comprehensive services we target segments of the population. we were the first to launch a dental product in south korea and now the first to offer a dental product in taiwan. we're listening to our customers and understanding what the market needs and we're bringing targeted products that the market needs at that time. >> how much of your revenue is from inside this country and outside? >> we had a large acquisition we closed january 31st that adds another $6 billion of revenue inside the united states. outside the u.s. order of magnitude about 20% of our revenue base, prior to that acquisition outside the u.s. and our non-u.s. revenue is growing 2 to 2.5 times organically our u.s. revenue annually >> david, thank you for joining us today. we hope we get to talk to you in studio soon. >> becky, thanks for having me.

good do see you again. coming up, "nightmare on wall street" we should have freddy kruger, the music, the sounds, "nightmare on wall street." we will talk to night capital competitor stifel financial and ask what the trading debacle means for markets as well as investor guys and seeing as this guy is a competitor he's probably happy. plus its products are in virtually every room of your house from crest to cheer to pampers to pepto bismol so -- i'm not sure, it's not surprising proctor&gamble is talk to us about the consumer and the country. er ] every day, the world gets more complex. and this is what inspires us to create new technology. ♪

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it's a nightmare on wall street, what night capital's trading blunder means for investors with skins in the game. fed worry, europe uncertainty and the pivot ol july jobs report. [ bell ringing ] the "squawk" team is on the job and diane swonk is here to help. >> disrupting a disruptor, what this social media giant is doing that could be a big speed bump. the ceo of stock twits alerts. >> proker i teer i er ier i ert

procter? >> the second hour of "squawk box" begins right now. >> good morning, everybody. welcome back to "squawk box" on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. we've been watching the future this is morning and they have sharply higher through much of the morning. they are up triple digits. dow is up 110 points after a 90-point loss yesterday at the end of the day. we do have the jobs report coming up, and that is going to set the direction. in our headlines this morning, of course, that july jobs report, that is the key, out at 8:30 eastern time and economists are looking for non-farm payrolls to increase by 95,000 and looking for unemployment rate to remain steady at 8.2%. night capital remains in the spotlight with the firm fighting for survival after a trading glitch that resulted in a $440 million loss. fidelity, vanguard and td ameritrade stopped running orders through knight which is pursuing financial and strategic

alternatives. and samsung is trying to get the jump on apple by releasing its new galaxy smartphone on august 29th, that comes two weeks before an apple event in september in which it's expected to unveil its new iphone. let's get to procter & gamble, earnings hitting the wires now and from continuing operations the company is talking about 74 cents, the estimate was 77 cents but i think we use 82 cents, which is the core earnings per share which would be above the estimate that we're looking for, 77 cents, which i wouldn't be surprised, maybe that has come down recently with some of the commentary out of procter & gamble. the revenue was 21.2 billion versus 21.6 billion. now we look at the forecast of

$3.80 to $4, which is okay because the estimate for fiscal 2013 is $3.88, so this company could use some good news. i want to make sure that it is good news so let's talk to cfo john wahler, first cnbc interview. i've never had to ask you, in p&g, typically does not have to field a lot of critical analysis or at least it hasn't since the days of dirk deigler, no dirk jagger and laffley came in and you were the darling. suddenly you find yourself back in the spotlight as maybe a company not being run as well as it has in the past. why don't you at least tell us about the numbers first and then we'll go on to some of the bigger questions and the bill ackman questions. >> sure, we continued to grow the company in a difficult enmie

environme environment, organic sales up 3%, strong growth in china plus nine, india plus 21, brazil plus 17, russia plus 18. our development market growth was a little bit below a year ago and our earnings per share, right at a core basis of 82 cents, in line with a year ago and we obviously want to accelerate the market growth and earnings per share growth and we have two major plans in place to do that. we strengthen significantly the programs in our top 40 category country combinations which are disproportionately in developed markets and those account for 50% of the company sales, about 70% of operating profit. as we get that going things will be much more attracttive. second we're well on our way for a $5 billion to $10 billion cost savings program. $2 billion is 11% in terms of eps so with continued momentum and develop markets, stronger core development market business

and substantive annual cost savings program we're in a good place to accelerate top and bottom forward. >> jon, why is the net sales growth estimated down between 4% and 6%? is that currency? >> yes. >> totally currency at this point. >> yes. >> the things you told us in the past and drilled down and later was an issue, i guess trying to deal with the difficult markets abroad, i guess in some of the foreign markets, and where you price things, and losing market share, et cetera, has that been the main criticism of the way the company has been managing? >> well, first of all in terms of our foreign markets, as i mentioned at the onset, those are growing extremely well, developing markets grew 10%, that's 45% of our unit volume growing at 10%. where we've had struggle is in the developed markets primarily in north america where we did take significant pricing to

offset significant commodity cost increases. we're in great shape. where we haven't we need to adjustment, making some adjustments. we put about $3.5 billion of pricing into the market last year. if you look at our pricing attributed to about four points to our top line growth in the quarter. we're not disproportionately out of step with the rest of the market. >> that's a perception. >> what areas did you raise prices where your competitors did not and and you had to reassess? >> two examples of that were powder detergents in the u.s., where we took about a 14% price increase, competitors chose not to price. they rolled that back a couple months ago, went from losing about a point and a half of share on our detergent business to the last three months growing share by 0.6 points. >> roll it all the way back or

how far? >> that one we did. another example is our blades and prizors business, we increased promotion levels to respond to competitive promotion levels and on that business we've gone from a negative share position to a positive share position so the business responds pretty quickly as we make tweaks in prices. >> some of the criticism under laffley the price increases looked like there was no end in sight, you could rise prices and people would pay for the brands they cared about so dearly and there must have been some ceiling that hit, a.g. laffley left at the right time, is that an accurate assessment? >> it's more of a function of the competitive environment. the pricing in the consumer products category is fairly price inelastic at a category level. if all shampoos go up or down there is not a big change in consumption. this is a competitive dynamic and most of the pricing is

working well. if you look at the premium priced initiatives, tide pods are doing incredibly well. crest 3d white, downey unstoppables, so particularly when we can couple prices with meaningful innovation and in a creative value equation for consumers, it works very well. >> you want to ask about ackman? >> i think we have to, to understand the dynamic between what's happening with your conversation with him and under what circumstance could you actually see him join your board. >> obviously board membership is an item for the board itself, so i'm really not in a position to comment on that. what i'd tell you is first of all, we welcome investment in the company. i certainly am positively oriented to people who see significant upside in our stock and we're interacting with pershing as we would any other investor. >> any other questions i'd be

asking about your boss, i don't know. i just wonder, barbarians at the gate, did you come up with that? there's only a couple there at the gate of p&g i think but i'm just wondering, do you talk about this at the company at this point, and there are some questions, he's under assault at this point. >> what we focus on are the three things i mentioned earlier, which is continuing our developing market momentum, strengthening our core developed market business, $2 billion per year cost savings, we get that right and we're going to be in really good shape. >> we'll keep watching and usually i bring up the reds. procter & gamble, look at the way the reds have been managing through the last month and a half. can you believe, they're winning like nine out of ten. >> like 21 out of 23. >> 21 out of 23. i knew you'd have the number for that, which is really incredible. anyway, tsheri, there was fear

in his eyes that i don't normally see when i brought it up, vout up, votto. knight capital lost millions after a trading that? few. ron kruszewski, what is your best guess as to what went wrong here? >> i think it was simply a program that executed trades for their own account. what i saw was very little disruption with so-called retail customers. you didn't have a lot of canceled trades so i think that they had a program that bought a lot of stock for themselves and they unwound it very quickly. >> ron, i know in some cases your competitor tonight, and other cases you're a customer. are you still using knight to

make trades? we've seen other customers stepping away. >> well, we are, first of all people don't recognize knight is the largest by a wide margin market maker on the street and what's happening today is they need to shore up their capital, which by the way i believe they're going to do. they will get the capital. it's a great business model so people are stepping away until they get some capital which i think they'll have by this weekend. >> you bring up a great point if they're the largest market maker on the street, what happens if this company is in question like this? what does that mean for trading overall? >> look what happened yesterday. lot of the order flow with the flip of a switch gets routed else where. we have deep, liquid markets. i don't really think that's the issue, becky. i think the real issue is the impact this had on investor confidence. i don't think that in the market it wasn't that big of a deal but as it relates to investor confidence combined with facebook, the flash crash, bats, all of those things, that has a

more significant impact, in my opinion. >> ron, structurally, is there a way to either with regulation or through some other sort of switches in the system, to prevent this from happening again? >> well, you know, they talk about circuit breakers, but look, in the overall market, it was not that big of a deal. the market, they lost $400 million, and i can see how that -- >> sounds like we lost ron's audio. i don't know if you can still hear us. if you can stay with us for just a moment we're going to get that audio back up and running so we can hear more of what ron kruszewski has to say. we'll take a quick commercial break. up next when we get back we'll bring in our guest host, diane swonk and preview the most important economic day taph the day, it's all about jobs as we await the release of the

government july employment report. at the bottom of the hour, stocktwits, the chief says he's been hijacked by twitter. hopefully we get back to the ceo of stifel. >> comments, questions, send them to @squawkcnbc on twitter, follow the show and look for updates from andrew, becky, joe and the "squawk" staff. [ female announcer ] want to spend less and retire with more? then don't get nickle and dimed by high cost investments and annoying account fees. at e-trade, our free easy-to-use online tools and experienced retirement specialists can help you build a personalized plan. and with our no annual fee iras and a wide range of low cost investments, you can execute the plan you want at a low cost. so meet with us, or go to etrade.com for a great retirement plan with low cost investments. ♪ trick question.

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welcome back to "squawk." we were speaking and we'll be speaking again with stifel ceo ron kruszewski. can you hear us? >> i can. joe, if you call stee-ful stifle -- >> i apologize. >> i didn't hear what you said. you're going to point out what? >> i said that the cargills are going to cat cardinals are going to get his beloved reds. >> i didn't say that. i wasn't interested in talking to you. i know how to say stee-ful, thanks, though. >> ron, where we left off, we were trying to figure out, is there anything that needs to be done to create any form of

circuit breaker so that, and i know it's only 400 million bucks but at the end of the day as you were saying it becomes a confidence issue? >> well, it does, and i really think the bigger issue is that there's almost an arms race on technology and trading, and speed and execution, how fast you can do things and how close the servers are to the data exchanges, all of this stuff i think has to be weighed against the fact that you need to bat 1,000 when it comes to market structure, not 999, and because it impacts investor confidence, so i think we need to step back as an industry and make sure that the race for technology doesn't often end like this, which impacts the investor on the street. they don't understand how this happens. they think someone loses $400 million, they can lose money and it has a significant impact on confidence. and look, there's been $300 billion that have left equity funds over the last two years,

and we need to recognize that part of that is a lack of confidence in our market structure. >> ron, what do you think the eventual impact of that lack of confidence is? >> well, again, i think you've got equity markets that, in my opinion, are undervalued compared to bonds. you've got a yield on the s&p 500 of 7.5% versus a ten-year of 1.5. i mean investors should be looking at relative value of equities, yet on the other hand, they're pulling money out of equity markets. that can have a lot of reasons but one of the reasons certainly in my opinion is the implakt of the flash crash and facebook, which was blamed on technology, the bats offering and now this. this all leads people to think they're going to invest, they want to think that their money is not going to get caught in some technology glitch. >> ron we were talking about the liability involved and the fact when you look at the facebook situation, the liability is different. you think there should be different rules than there are

today? >> well, the liability, i heard that, what you're talking about. the jibliability here is simply knight bought for their own account and they're going to settle those losses on monday primarily with the street, not with customers, so i think that in this case the liability has been accounted for, and it will be paid for on monday. that's the beauty of the markets, they settle these things really quick. >> ron, i want to thank you very much for joining us again today. great talking to you. >> good talking to you. have a good day. >> thanks, you too. it is jobs friday. we have a perfect guest host with us this morning, diane swonk, chief economist and senior managing director at mesereau financial. good to have new studio. >> good to be here, thank you. >> the consensus is about 95,000. where do you stand? >> unfortunately at the consensus, i say unfortunately because i don't like being that indifferent but frankly it's rolling dice forecasting numbers these days. there's two things we can look

for. one side of it the economy is weak, could be much weaker but we have the crooky things with the auto industry, keeping plants going in the middle of july. lot of plants that should be falling off didn't and that can give us a screw in the other direction. the data is weak at the end of the day. >> even if you see a better than expected number your take is there's some noise and not real. >> yeah and if we see 250,000 hallelujah but frankly that's a big stretch and i don't think we'll get there. if we do, i'll be glad to be wrong. >> what do you think is really happening beneath the scene? we've talked to a lot of ceos, some of whom, cargill ceo i keep referencing and told us a lot of information, he'd love to hire more people in their meat processing business. as soon as demand's there, he's ready to hire. >> demand is the key but there's two things. i look at it almost as a flipside of the '90s, we had the

robust growth and caution to the wind. we were talking in the last segment about certainty and uncertainty in the markets. uncertainty is at an extremely high level in terms of policy making with sub par growth and creating a vicious cycle of weak growth and hesitation. >> nothing that's going to break that before the election. that's the real problem. >> exactly, and the real problem, is congress the real problem, european political leaders. the real problem is out of our hands, it's self-inflicted to some extent but it's out of our hands and we have the repercussions of a financial crisis but it's been exacerbated by this extraordinarily level of policy impetus in washington. the europeans are giving more than people give them credit for. joe pointed out the european view on draghi versus our view. i have a lot of friends in europe, had a bunch of economists in and also friends, and i'm reading all of their stuff coming out of europe and the stuff we were writing and there really was some, draghi was tactical here.

i actually think we didn't give him credit. >> almost like john roberts. people still don't know what john roberts did with obama care but i think over in europe they're thinking wow, this is breakneck speed for us. this is lightning fast. whoa! slow down! >> well, they're sovereign countries. they're working with each other better than our own congress is. >> he had to handle germany in a certain way, and they're right. >> it was one victory but i think germany is losing the war. >> right, but you don't want to just let them know, you know, each step of the way that they're losing. >> you got to be tactical. it was really interesting. i think we didn't give them enough credit, and i was watching it yesterday and steve's trying to, i'm listening to you guys, trying to interpret it as well. what is he saying? because you felt like here he promised this and where was it? i saw your reaction as well. having the data, to digest is

all, the problem you bring up, joe, politicians move much slower than markets and the real risk is markets could become self-fulfilling in terms of europe. >> sometimes politicians don't realize that. >> sometimes? >> yeah, yeah. >> come on, it's amazing, i remember when the t.a.r.p. went through, i was talking to one of our representatives that was running out on the floor and saying, "the market's down almost 1,000 points. we're not getting the vote through. do you not understand the markets are pissed off at us." >> they had to beat them over the head. >> and it's amazing to me the disconnect and markets move too fast, too. sometimes they get ahead of themselves. >> diane will be with us for the rest of the program. >> i think yeah, liesman might have a good joke and he's never had one before. >> don't steal his thunder. >> all right. >> don't tell us. after the break we'll hear the joke and more, in addition to that, there's a crack in the equity market at least that's

what people are thinking, knight tradings a s $440 million softw glitch trade, the ceo of stocktwits will give us his perspective and talk about his bat well twitter, come up. time for today's aflac trivia question, which university received the largest ever donation? the answer, when cnbc's "squawk box" continues. man, i'm glad aflac pays cash. aflac! ha! isn't major medical enough? huh! no! who's gonna help cover the holes in their plans? aflac! quack! like medical bills they don't pay for? aflac! or help pay the mortgage? quack! or child care? quack! aflaaac! and everyday expenses? huh?! blurlbrlblrlbr!!! [ thlurp! ] aflac! [ male announcer ] help your family stay afloat at aflac.com. plegh!

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welcome back to "squawk box," everyone. among the stories that we are following this morning, even though the july jobs report will get the bulk of investor attention today, another economic report is also on the

calendar, this is the ism's non-manufacturing index, a measure of the u.s. service economy, out at 10:00 a.m. eastern time, expected to come in at 52 even, barely changed from last month. we're watching shares of kraft foods, earning 68 cents a share for the second quarter, two cents better than the street was expecting. revenue on the light side but kraft is maintaining its 2012 earnings forecast. and s&p has agreed to pay oracle $306 million, the agreement still needs court approval clears the way for oracle to ask an appeals court to restore a $1.3 billion jury award. the companies want to expedite resolution of the case and save the time and the expense of a new trial. we've got a battle brewing between twitter and stocktwits over the use of the dollar sign to tweet about stocks. you probably know about this when you look on twitter there's a little dollar sign before a

ticker, joining us from san francisco is howard lindhsen, stocktwits ceo. i imagine twitter is now trying to ape your product. >> well, good to see you, andrew. it's been a little while from our wall strip days. >> yep. >> i would have to say that yeah, call it a hijacking but stocktwits is its own community. you go to the iphone app and you can tune right in to what you wand and trending so i would challenge anybody, side by side, stocktwits dotcom, figure out what you'll do on twitter and if you love stocks and you love markets and you love talking about them all day long, stocktwits is a dynamite product but yeah, we started the dollar sign on twitter obviously, we saw it on twitter and said well that would be interesting if i could really bring alive stock chatter, so now four years later, once we've built it, they've decided successful enough for them to do.

>> when did you find out that they were doing this? >> my mom called me. she said, "ha, word! something's going on." it leaked from the company a couple weeks ahead of it, and we were all fully prepared for that to happen. >> you can't be that upset about this then. >> well i'm very wealthy. no. upset is not -- we don't have time. we're a startup 15 people, and we've been building off of this idea of the dollar sign for four years on stocktwits, so twitter has -- here's the problems twitter has. first of all if you're in the financial business, deleting a tweet is like the worst thing you can do, so on twitter you're going to be dealing with petty stock people and people that delete messages and all kinds of other problems. on stocktwits we think financially. i run a hedge fund, started wall strip which i sold. so our market we understand our market. we grew up in, i grew up in the

time of jim cramer who was teaching us how to do this stuff. >> howard, take me behind the scenes. was there ever a time where you talked to twitter will selling stock twits to twitter? >> no. we have never had those discussions. >> you've never had those discussions. i did notice, though, that you owned shares in twitter, private shares in twitter and recently sold them? >> yeah, it was -- >> coincidence, i imagine? >> i think it took a long time for me to sell my shares, you know, not that smart, i would have sold my shares a couple years ago but there's restrictions on who and how and as it so happened a couple weeks ago i got to get my shares done and so great transaction for me and a great ride with twitter stock. >> are you bullish on twitter? do you think this is -- we talk about what's happening with facebook and social media broadly in terms of valuations, is this a suggestion that maybe it's not all it's cracked up to be? >> it's hard for me to be bullish at a $10.5 billion

evaluation i gave. as an investor i want to give money back to my clients to buy apple. my job is to early stage invest and i don't think it's my job to manage $10 billion private companies. this one i got big, but in the meantime focus on making stock twits. i'm investing heavily in other microverticals. i look at twitter as death by a thousand cuts. everybody gets a microphone on twitter but the real specialists will take their communities, it's all about this microniche community. they say hey i'm going to teach you how to build this core community. twitter is for news and broad, trending topics which are generally humorous so i think this is day one of what happens around micros. >> howard, can i ask you about what the community thinks just with night trading or with knight capital and the huge implosion at the beginning of trading earlier this week.

what kind of reaction did you get in the stocktwits community? >> well, i think the stocktwits community is skewed toward the skeptics. it's a very positive group, so at first there's worry of any of our community members are going to have trouble, but we've been expecting these type of problems for a very long time, because you know, whether it's with the futures commission and some of the problems around the commodity companies, you know, this is general unwinding and distrust of the institutions, whether tre underfunded or undermanned. there's just this lack of trust, so i think you know, we've been skeptical and we're not happy, obviously, about these mistakes and everybody's worried about their money. >> how big is the community, by the way? how many accounts are there on stocktwits? >> closing in on 180,000 sign-ups, and a very active regular crowd. you know, about 40,000 to 50,000 a month sign in, and actively

participate and obviously because we have distribution with yahoo! finance, cnn money, so a lot of our audience can check what's going on, around the web. >> howard quick, you have built obviously a business on a platform now known as twitter, and there are others like you who are doing this, and you just said you're doing this, you're looking at other microverticals. now knowing and seeing that twitter has effectively invaded your space, in the future, would you build another business on top of twitter, and the other entrepreneurs that you know out in the valley who have seen this happen, how do you expect this to change the landscape, if it does at all? >> great question. so building a business on top of a platform is not a business. okay? facebook -- zynga did it with facebook. there's two worlds, there's the facebook world and the twitter world. verticals apply to one or the other. zynga applied themselves to the facebook world and slowly has

moved this way. stocktwits quickly because of real time attached itself to the twitter world and has slowly moved, there we go, that way. you slowly build the features that allow to you build the deeper community as you move off your host platform. you can't really decide to live on a platform. if you apply services and make those better, the mistake i think that twitter is making versus facebook is facebook has spawned the budding medias which i happen to be an investor in, a ton of other $50 million to $800 million businesses. so far twitter spawned off tweetdeck, which is a $40 billion business. the platform is much more in facebook's favor and there's stress at twitter about how to do these things. >> howard we thank you for joining us this morning, interesting battle, also quickly want to note that twitter did not respond to our request for a comment on this story. but thank you again to howard. >> stocktwits, right? >> right.

>> i think stocktweets it's better. twit is a negative connotation, doesn't it? >> i think one of you slipped and said stocktwit. >> it is stocktwits. >> i don't want to be a twit. >> you want to be a tweet. >> some things are hard to avoid, joe. >> i don't want to be a tweet either. coming up central bank chiefs bernanke and draghi, two of them, putting potential moves on hold but maybe getting closer as the markets wait. we'll tell you what it means when "squawk box" comes back, think as a brick. monday, it's three months from election day, we'll talk jobs, the economy and the race for the white house with political analyst and former congressman, harold ford jr., and we'll ask morgan stanley's chief u.s. economist how today's jobs numbers affect his outlook

for growth. don't miss "squawk box," starting on monday at 6:00 a.m. eastern. st find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start. our support teams are nearby, ready to help. it's no wonder so many investors are saying... [ all ] i'm with scottrade.

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the dow futures up at about the highest levels of the morning about 110 points above fair value after a 90-point drop yesterday. >> you want to just -- >> i'm just, so. >> mwah! mwah! >> that was nothing yesterday, that was nothing? we're getting back more than we lost yesterday. >> right. >> and we had already had 500, smarty pants, smarty pants. >> i had already told about draghi. >> and joe and i are agreeing on something here. >> oh, god. the fed and the ecb -- >> scary. maybe because we're in close proximity. >> putting -- all right, i started, the fed and the ecb putting any potential economy-boosting moves on hold and ecb chief mario draghi is standing pat on his promise to keep the eurozone in tack. joining us is norm orenstein, author of the best selling book

"it's even worse than it looks" and guest host diane swonk is here. before i get to you, norm, liesman has never had a funny joke, economics joke but said a snail was mugged by a turtle and the police asked the snail what happened and the snail said, i'm not really sure, it all happened so fast, that's what he's saying about what's going on -- >> in congress. >> in europe. can these -- was it disappointing what we got from draghi yesterday or was it sort of about as quickly as a snail is able to move? >> i was also in europe this week and the europeans are not nearly as pessimistic as we are about it but certainly if i were in the obama white house i would have preferred something a little bit more decisive. what draghi does at this point and whether he can follow through and at least whether he can keep europe from dropping into a much more catastrophic situation before november has probably as much of an impact on obama's chances for relocation

as anything mitt romney does. >> i'm looking forward, i got something that says "i know it's old news but isn't it odd obama calls hollande to discuss europe and the euro yet unwilling to call boehner and discuss the economy in the u.s. we haven't had a budget in three years. >> we had a budget, the budget control act that vold tfollowed debacle over the debt limit was a budget enacted into a law, whereas budget resolutions don't mean that much. the problem we have now is you've got the republicans in congress who decided that the act they all signed onto and where boehner said i got 98% of what i wanted now they don't like any part of it. they want to double down on the defense budget to bring it back

to where it was supposed to be, ignoring all the sequesters they voted for, and then double the cuts on the domestic part of the budget and that's not going to work and a part of the reason you don't see much conversation between obama and boehner is, even if obama and boehner reached a deal, it wouldn't be something that the republicans and the house would agree to. >> both sides have plenty of blame to go around. raising tax, letting the bush tax cuts expire just on the -- that's a non-starter and that's all we hear from the other side. they tried five times to do that, it's never been possible that was going to happen and yet for political posturing that's what they keep putting up. neither side is serious about getting anything done. >> certainly we're not going to see any dramatic action before the election and then there's question whether we'll deal with the fiscal cliff in the lame duck election and the election

itself is going to depend more on the state of the economy and the public's perception of where we're going than anything else. >> norm, it's diane here. good to see you. >> hi, diane. >> you brought up the fiscal cliff and one of the things that is a concern out there is the uncertainty about where we're going and it is really amazing how markets think at the last minute we'll figure this out, where i know you're pessimistic about that. the other issue is with the fiscal cliff even if we figure it out and kick the can down the road we have a serious risk of getting another downgrade. people say the last downgrade didn't matter, it did have ripple effects on mini bond markets and a lot of other interest rates, even though it didn't affect the treasury market. what is your sense, we just kick the can down the road and could be at risk for a downgrade? >> i think we're at serious risk for another downgrade. standard & poor's said yesterday it reached a deal at the 11th hour but we've never seen

political dysfunction like this and doesn't give us any confidence in the future. if you recall, john boehner was going to become speaker in the 2010 elections the first thing he said to his incoming class is, "now we're going to be responsible, we're in the majority, swallow hard and do things we don't like and that includes the debt limit." that didn't work very well but what we have now is boehner is leading the way saying we're going to hold the debt limit hostage yet again probably towards the end of the year or maybe sooner depending on what happens with the economy with very few signs that we're going to reach any kind of a broad based deal, the kind that we know has to be done, the template that all of the outside commissions and the gang of six have done. i think another downgrade is seriously possible, and the only reason i think that we've avoided many of the consequences is, everybody else is in worse shape than we are. >> unfortunately it's the old cleanest of the dirty shirts, isn't that mohammed el erian and

bill gross. norm, one other point you made, people say it's been polarized before, congress has been polarized before. you're a scholar on this. how polarized are we? is this as bad as kennedy trying to put through the civil rights legislation when he was president? where are we in terms of the spectrum? >> much worse than that. if you go back to the civil rights era we wouldn't have had the civil rights bills if it hadn't been for a courageous group of republicans like everett dirksen, senator from illinois and the congressman from ohio who helped save civil rights from southern conser conservative democrats. we had bipartisan coalitions that developed all the time. now for the first time ever, we do not have, since we've been recording these things, we have no overlap at all between the parties ideologically in the senate and the tiniest amount in the house and that's lickly to get at least in the house worse in the next congress, and we

have basically parliamentary style parties which is something we're not used to, that would be fine if we had a parliamentary system but we don't and when you have a parliamentary determined to vote no on everything, because they don't like the outcome if it means that the president might get some credit for it, it is worrisome, and, you know, you have to hope that we get some break after november, but there is no real sign of it. >> and maybe worse, norm. and in the senate you saw what happened in texas and rand paul is already there, and the senate could have a tea party wing at some point. >> well, it is going to have a significant one. it is the jim demint wing, but what you also have in the senate is a group of problem solvers and people like lamar alexander of tennessee and bob corker of tennessee and the people on the so-called gang of six and the democrats in the middle, and you can find a center in the senate, and in the last couple of months we had 74 or 75 votes for transportation bill and the farm

bill and then it just dies in the house. you can't get anything done. the idea that we have a terrible drought now that is devastating livestock, no action to deal with it for months is pretty depressing. >> all right. norm ornstein, appreciate your time. thank you. okay. coming up, it is getting closer by the minute and we are on the edge of the seat, and the preview of the july jobs report coming up at the top of the hour, and first a round-up of the olympic action and a closer look at speedo, and i don't know who is into speedo. michelle, what is coming up? >> you must have seen the spee dlooes night, because boy, it was exciting, andrew. did you see the men's swimming? the two americans facing off and ryan lochte and michael phelps and who won? well, speedo won. and is it proper to sponsor olympic athletes? we will be live right back with the olympics of london 2012.

♪ you just heard that tease for michelle, michelle caruso-cabrera is in london and has a great story on what's happening at the olympics, michelle? >> hey there, becky i cannot wait to see the ratings from last night. everybody was so interested in this huge race between the two dominant american swimmer, michael phelps and ryan lochte, the 200-meter individual medley. who was going to win? in the end, michael phelps, 20th

career medal, still the most decorated olympian of all-time, ryan lochte coming in so close, right behind him, with his 11th medal. it was really exciting, but of course, no matter who won, speedo was the big winner, sponsors for both of those two exciting swimmers, and we had a chance to speak with the president of speedo usa, jim gersen, he was showing us all the equipment and paraphernalia and particular the trunks and the whole fast swim, fast track swim or the fast skin suit as they call it that those two guys wear. they spent a lot of time thinking about it's roww it's rw dialics of the trunks and the swim caps and bottom line, sponsoring olympic athletes adds to the company's profitability. >> it definitely helps the bottom line. we see a lift of 12%, 18% after the olympics so the high profile of a ryan or a michael helps us

immensely. our goal is to inspire people to swim and get them in the water. >> tune in to "squawk on the street" because we are going to have an interview with ryan lochte coming up. we're so excited about that. again his 11th career medal and he says he is coming back in four years. andrew, back to you. >> he's been fantastic, everything i've seen about him. >> yes. >> i cannot wait to see this interview. he seems like a really good guy. >> he's half cuban. did you know that? >> i did not. >> cuban-american mother. >> he was flipping a huge tire like a truck tire, anyway i'll be watching for that interview. it will be good. >> with lochte? >> yes. >> i think michelle wants him to flip her up in the air like throw her up and catch her. don't you, caruso-cabrera? that's what i'm hearing. she's not saying no. >> it is his birthday, i could give him a present. >> mr. olympic swimmer. >> not a family program.

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♪ you do and your forecasts. welcome back to "squawk box" here on cnbc, first in business world wild. i'm joe kernen along with becky quick and andrew ross sorkin. our guest host is diane swonk, chief economist from mesereau financial. joining us for the rest of the show austan -- no! mark zandy.

>> austan -- >> there he is. >> mark zandy's very handsome so at the very least if i say you look like him it's not -- >> i have one or two more hairs than austan. >> all right. we'll be back to you in a second. how's it going, austan? are you good? >> pretty good. >> andrew is going to read something but you'll get your forecast in a second. i'm wondering whether you're still as pessimistic. >> welcome to the party. let's get you caught up on headlines. the july jobs report is just 30 minutes away, that's why we have this great panel around us. the dow jones survey of forecasters saying the economy likely added 95,000 jobs last month, the unemployment rate expected to stay at 8.2%. let's take a quick look at u.s. equity futures ahead of that report, you can see we've got some green arrows across the board, dow looks like it would open up 102 points higher, that could change depending on what we hear in the next half hour. in other headlines, procter gamble reporting second quarter

earnings up 82 cents a share, a knickal head of estimates. revenues came in line. the company also announcing it would repurchase $4 billion worth of shares its fiscal year. >> that's today's trading, closed at $63.51, so it's reacting positively to the number. i don't think people were expecting the five cents, although maybe estimates came down, given some of the rough patches the company's been through in the last couple quarters. >> it's interesting what jon mohler said about the prices and weren't able to stick. they said when they rolled the prices back they got it back. >> not surprising. >> krcramer has been critical o the ceo and i want to see what he says, talk to him. >> he's the one who first started talking about how they can run into a ceiling. >> we'll talk to him maybe. >> and p&g cfo in the interview with joe told us that the

household products giant will continue to grow and that may be te helping us here. >> continue a momentum in developing markets, stronger core developed market business and substantial annual cost savings program we're in a good place to accelerate top and bottom line going forward. we're also watching knight capital, the firm seeking funding after the $440 million trading loss caused by a software glitch earlier this week, wiped out much of its capital. stifel financial chairman and ceo ron kruszewski earlier on "squawk." >> what's happening to today is they need to shore up their capital, which by the way i believe they're going to do. they will get the capital. it's a great business mdle so people are stepping away until they get some capital, which i think they'll have by this weekend. >> all right, let's focus on jobs. we have a full table of experts as you've already seen. diane swonk is here, mark zandi is here and steve liesman and former council of economic

advisers chairman and economics professor austan goolsbee. austan, tell us what you're looking for. joe already alluded, wondering if you're as neglect of a as you have been. what are you looking for this time around? >> i expect only about 65,000 because of all of the stuff in europe, our growth rate is measly and with a measly growth rate there's no secret there are not going to be many jobs. i haven't seen much change in the dynamic the last three, four months. >> diane pointed she's looking for 95,000, saying there could be an upside surprise because of what happened to the autos, factories, a lot of noise with seasonality there? >> i hope so, but you know, the overall thing is if we're growing 1.5%, we're not going to have good jobs numbers. >> are you looking at 8.2%, too? >> i think it might go up to 8.3, but either stay the same or tick up a bit. >> okay, mark, how about you? >> i'm more optimistic as i have been, wrongly so, though.

i think 125,000 for the month, but i will say this is, for me, a very important report because if it comes in soft again, i'll have to rethink things. >> you throw in the towel at that point? >> my sense is there's a lot of things going in the data, weather payback, seasonal adjustment issues and that should be playing out of the data. so this report, and i should say we should be focused on private sector employment because local government could swing big time because of teachers leading the payrolls but if private sector employment is below 100k, that would make me rethink things, that something more fundamental is going on here. >> steve, how about your number? diane already told us 95,000. >> i'm a little bit more on the optimistic side which has been the wrong call for quite a while. >> we'd like it to be right. >> the claims four-week average is down. >> bottom noise from the auto industry helps. >> the other thing swing factor could be government in that state financials are doing a

little better, maybe there were not as many layoffs. july is a big month for layoffs in the government sector. i'm not going to be excited about private sector job growth if the government laid off fewer people but you could get a pop from in that in that the seasons might expect a bigger layoff. the ism employment indicators have not been terrible, so you could still make a case that you have a bounce-back. the only thing it's too early for the fall bounce-back we've had the last three years. it's been a september-october phenomenon and i don't know that anybody quite understands what's going on in the sense that austan can blame europe, and we can blame the fiscal cliff stuff. the fact is for three years we've had this seasonal bump in the first part, decline in the spring and bump back. >> there's some problem with seasonal adjustment. >> what is going on is is a problem for clearly every economist and whether that's a larger dynamic of any of the

dynamics we think are affecting unemployment. >> last year it's what happened in japan with the earthquake and some of the fallout from that, it may be more than just -- >> the debacle and the european crisis, the flash crash, and we had a lot of things going on as well. >> bernanke mentioned in a footnote the idea of the seasonality from the lehman crisis changing the dynamic of the seasonality here and never expanded on that. i really wish he would talk about that. mark, you must have done some work on this, that this huge problem we had in the lehman crisis created a new dynamic. >> because of the way the aseasonal adjustment is done it's averaged in. >> we lost 850,000 jobs in january of '09, then 800,000, 750,000, those are big job losses so statistically you think there's some seasonal issues in there so you bring that into the future years into

the current period. >> it gets averaged in. >> -- in january, february, march and takes away from april, may, june. goes to my point if it doesn't start getting out the data by july, maybe something more fundamental. >> one other thing i'm trying to figure out, maybe austan can answer or somebody, the unemployment rate should be going up higher if gdp is as weak as it is. right? >> austan you're saying 8.3%? >> you guys -- >> i think the payroll employment number is a little easier to tie lately to the gdp than the unemployment rate is, because you had some unusual labor force stuff. >> yeah. >> i think steve's point is very good about the seasonality, and in particular, there's one technical way that they're doing the seasonal adjustments now that makes for a problem, but where you can partly see it is if you look at the revisions of the seasonally adjusted number, you see these massive revisions over and over and over, and if

you look at the non-seasonally adjusted or start looking at the year over year changes, you don't see nearly as much going on in that series as in the other, so that suggests there probably is something in the methodology, but i just can't get past, if we're growing 1.5%, it's not about seasonal adjustment. not about any of that stuff. we're not going to have a good number. >> if you look at year over year of gdp growth through q2, it's 2.3%. and q2 itself is now tracking higher than when it had, tracking closer to 2, so it feels to me -- >> i hope that's right. >> so if gdp is growing 2 to 2.5% you can get monthly job growth that's 100,000, 150,000 per month. >> i agree with that. i agree with that. >> quickly, austan, i saw something that said the head of the cea is the one who tells the president about the numbers on thursday. >> yep. >> and when you were there in

that job, you had the responsibility of telling president obama and one time when the numbers were better than expected you got the presidential fist bump? >> yeah, i usually made it the tradition was that the cea chairs essentially wanted to deliver the news if it was good and they'd send it in a memo if it was bad. i changed it, if it's good or bad i'll come over and give it to you and there was one month it was particularly good and he was real happy, and i would usually introduce it, i'd try to fake him out and say well, you know, you want the good news or the bad news? the president would say "oh, why is it always like that with you economists?" >> unfortunately he's right. >> the unemployment rate went down this much -- >> unfortunately you're right there was only one month where it was good, that's why you only stayed in that job for, how long were you in the job you got the hell out of there quick? it's like thank you, sir, may i have another, whoosh!

thank you, sir, may i have another? man. >> so he would ask, well, what was the bad news? i said, no, i'm just messing you, there was no bad news, and then he gave me the fist bump. >> austan, stay with us. by the way, everybody here around the table is going to be staying, too. our jobs panel will be back in a moment. steve, quick thing? >> i just want to point out two-year spanish bond is down 60 basis bond. >> europe is seeing this different. draghi is -- >> that's my point is that that's what you would expect a steepening of the curve if people believe eventually either the spanish were going to help or the ecb was going to get in there, a reversal from yesterday. i know you have mark grant coming up and he's the guy to ask about this stuff. >> some men just like to watch the world burn. >> the guy coming up by the way, likes to watch -- >> got binoculars. >> joe and i agree on this one. a report from knight capital

where the trading firm is searching for funding and we're counting down to -- counting up to the 8:30 eastern and that july unemployment report, bringing data and reaction from our jobs panel. love darius, love him, and we'll get reaction from ed lazear, former economic adviser to president george wabush. ♪ you and me, we come from other worlds ♪ ♪ you like to laugh at me when i look at other girls ♪ ♪ sometimes i'm crazy and you wonder why ♪ ♪ i'm such a baby because the dolphins make me cry ♪ on how different asset classes are performing, and it lets you go in for a closer look at areas within a class or sector that may be bucking a larger trend. i'm stephen hett of fidelity investments. the etf market tracker is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea.

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welcome back to "squawk." the future of knight capital is in question this morning. cnbc's mary thompson joins us from outsite the firm's headquarters in jersey city, ewg jersey. good morning. >> reporter: good morning, day three after the trade debacle. the mood inside one of the employees said is "weird." he also hasn't heard from ceo tom joyce. he expressed confidence eventually the company would be

acquired, that's a a sentiment others shared with us outside of the trading headquarters here, all declining of course to go on camera and most declining any comment saying they have told not to speak with the press. one female employee came out visibly upset, she said "you need to know this is one of the best firms ever" and also told us that we needed to get a life. such emotions are understandable, given the firm's existence hangs in the balance today. its stock down 75% since wednesday when new software triggered a trading glitch that caused millions of erroneous trade and also causing a $440 million loss for knight. that loss could prove to be a mortal blow, it's more than the trading giant's cash on hand and tripled its profits from last year, it spurred, joyce, a merrill lynch veteran and ceo since 2002 to reportedly hire sam o'neil to seech a cash infusion or outright buyer. the question is how much more

time does joyce have? regulators on the ground say the firm has enough regulatory capital but a number of its big named clients including the mutual fund giants fidelity and vanguard stopped sending orders to the trading firm and the 17-year-old company has also asked others including ci citciti and jpmorgan to limit the trades they send to the company, this is a move, of course, that will help it preserve that much needed capital at this time. the situation remains touch and go but if you speak to people on wall street, they say what knight has is some very important and valuable trading technology, something that should allow it to eventually find a white knight. guys, back to you. >> thank you, mary, for that. i imagine it will be a busy weekend for knight and perhaps for you as everyone's reporting what's going to be happening. let's talk about the fed and the ecb, and whether there's raised a little bit more questions than answer this is week. joining us now, mark grant, managing director at southwest securities. mark, some conflicting views

around this table as to interpret what we heard both from the fed and from the ecb. let's start with the ecb. where are you? >> well the ecb basically backed up from the comments draghi made in london. i thought it was very interesting he focused in the "may" word instead of the "would" word and i that i right now this morning there's hope again that the ecb is going to do something, though we heard specifically this morning from the german economy minister who said the ecb should focus on price stabilization and not buying bonds, and we also heard from the deputy finance minister in germany who said that the esm or the money available to bail out other countries was not going to be any increase in the german contribution, and i thought those were significant comments. >> you know what?

diane? >> yes, i just wanted to jump in here. one of the things that draghi made the point about was that inflation expected to further decelerate and further drop in europe, with the recessions in europe so keeping in line with that whole issue of inflation stability, it actually supports, it's the cover for stimulus and monetary policy intervention which there is some issue on the ecb going into fiscal policy here but i think the europeans i know and actually understanding what's happening, i think germany won a tactical battle but i think this was a battle, they didn't win the war and i think they're losing the war now. >> do you buy that, mark? >> no, i don't buy that. i respectfully don't buy it but no, i don't buy that. i think germany is going to stand firm in its position. they're only going to fund so much. let's look past the inflation issue, which, okay, fine, they're under the inflation issue but then it gets into who is willing to fund what. you have germany, you have the netherlands, you have finland in one corner, and you have an increasing amount of countries in the other corner, italy,

spain, greece, portugal, and so forth, that need money and there will be a tremendous amount of pressure put on germany but i don't think in the end germany is going to be willing to rise to an average cost of funding or rise to an average standard of living of madrid and lisbon in order to address the problem, and i think germany is going to say nien, or no. >> it's steve here, by the way. >> hi, steve. >> as opposed to diane. >> hard to recognize you without a cigar, mark, that's the thing. >> i know, what can i tell you, steve. >> you have to admit germany has not been decisive on key ecb actions, but let me ask you another key. if the ecb wanted to, and it came in and said we will set a yield on the spanish two-year, that is 200 over an average in the eurozone, it could do that

simply by saying that and wouldn't really have to purchase very much in the way of bonds the way central banks kkt, the market would do its bidding for it, if it put the resources behind it, is that right? >> they don't have unlimited resources, steve. one of the issues i pointed out in the commentary, the esfs, the fund in existence, as we know the esm is not in existence yet and tied up in the german courts but when they're put together, the total is $1,500 million some odd dollars. >> nothing is going to happen until the ecb commits unlimited and when it does commit the ecb won't want to spend any money. >> that means the ecb prints and germany rolls over and says we have unlimited liability. that's the differentiation point

where i don't agree and some people think it's going the other way. >> if it comes with the esf program which is conditional upon spain et al getting their act together maybe germany acquiesces. >> well that gets down to the issue. i don't think germany willing we would's because they'd jeopardize their own economy and taking on a tremendous amount of debt that's going to drive their funding cost up and hit their own economy, at a time when all of europe virtually is in a recession except for germany and i think by the fourth quarter of this year, germany is going to find itself in the same place, that's my view. >> guys, i want to interrupt, comments here from the spanish prime minister, he says will do whatever is best for spanish interest with regards to asking for financial aid. >> there you go, bingo. >> i don't know if that advances the mark. >> mark, does that advance, if he asks, he gets, it sounds like? >> yep. >> yeah, i think if he asks, he

gets, but where i think that the people with the great optimism have not gotten far enough down the path is the cost of getting. you're looking, in my estimation, for spain as an example, if you take the regions of spain that are troubled, if you take the spanish banks, you're looking at $300 billion and $400 billion problem, that virtually wipes out the new esm right there, before italy gets to it. >> mark on that down note we have to leave it there. we will see what happens. buckle up. diane and mark will stay with us and we appreciate your time this morning. all right, still ahead, we are counting down to that 8:30 a.m. eastern jobs report, the number of the morning. we'll bring you the number and instant reaction from our panel of experts. ♪ but we never say a thing you do what you do...

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coming up, we're a few minutes away from the july jobs report. take a look as we go to break at u.s. equity futures, big green arrows across the board. we'll see whether those green arrows hold up, when we get the number.

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welcome back to "squawk box." we're a few seconds away from the july employment report, ahead of that we've been watching the futures which are indicated sharply higher, up by over 100 points. we get to hampton pearson. >> up 163,000, july non-farm payrolls increased by 163,000 jobs, the unemployment rate 8.3%, average hourly earnings increase 0.1%. it's the biggest monthly job gain since february of this year, ahead of consensus on the job growth, a slight uptick in unemployment. we had 172,000 additional private sector jobs. we also had revisions as far as the last couple months a net 6,000 fewer jobs reported than previously. as far as the uptick in the unemployment rate, it's all about the household survey. the overall size of the labor force and the household survey declined by 150,000, that's

because employment decreased by 195,000, excuse me, yes, employment decreased by 195,000, unemployment uncreased by 45,000. job growth plus 49,000, professional and business services 29,000, food services plus 25,000 manufacturing, 12,000 additional jobs added to the health care sector. we did have a decline of 8,000 jobs among utilities, primarily due to a labor management dispute. overall 12.8 million unemployed persons, 5.2 million six months or longer, 40.7% of the total unemployed. back to you. >> all right, hampton, thank you very much. let's get to our panel of experts for reaction to the numbers. diane swonk, mark zandi, austan goolsbee. steve, tell us quickly things that jumped out at you. >> you can look at the column of job growth by industry and there's only one negative in there, so just a visual kind of thing, it was relatively

broad-based services, coming forward with 148,000. i think it's instructive that june was revised down, which we didn't miss any strength back there to the extent there's any turnaround it's a turnaround that happened in july, not something we missed in june. i want to look at temp services up 14, not bad. government was down again, minus 9 so that did not help the top line. leisure and hospitality back to 27,000. i think you see this somewhat as a bounceback. >> rick, talk us through the market reaction, futures are up by more than 140 points above fair value, building on those gains we've seen through the morning. >> i guess the best way to frame how the market's interpreting this data is look back toward the ten-year note yield close last friday, basically around 155, that was the highest yield close since roughly the fourth of july and it was under the contex of mario draghi overpromising, and of course in hindsight underdelivering but the reason i'd pick it is we

basically moved right up to that level basically what would have been a one-month high yield if it closed there and it backed off, so i think that is significant. the treasury market is acknowledging what the equity markets are acknowledging, that these numbers are a bit better than expected, and that's a good thing for the economy. but i see a residual bid that comes back and treasuries that we need to pay attention to that just understands that it isn't enough, kind of keeps us in the gray zone in terms of not enough to be excited, not too little to start to panic, and that seems to be the market's interpretation. >> although, mark, you did say that this would be the month, if we didn't get at least 100,000 in private sector, you have to think you have 172,000. >> if you go back and look over the last two years, average monthly payroll employment growth has been 150k, almost on the nose, goes up, it goes down, some months a little lower, some months a little higher but we're

getting 150k and this number suggests to me underlying job growth is 150k, and that's not great, i mean great in the sense we're not going to bring down unemployment in a significant way but that's okay and enough to keep the economy moving forward. >> diane? >> it was interesting, we were going through the numbers, one there was seasonality with the auto sector so we did get a little boost and there's spillover effects. one of the things that came out in the fed beige book, tourism was up and we saw that in leisure and hospitality as well. i was surprised the beige book wasn't more negative and one of the things that jumped out was that tourism component and you got kind of a jump there, you noted it, steve. >> 27,000. >> 27,000 in leisure and hospitality. >> that was a bounce-back from the seasonal. we hired all of the people on the roller coaster in the wintertime, they must have opened six flags in january. >> that's the problem, there was a bounce-back in tourism across the board. >> that's right, nobody should be that happy and nobody should be like, you know. just because we're back to 150

isn't a reason to break out the party hats. >> no champagne. >> austan, while you looked at the better than expected numbers for the jobs picture, unemployment ticked to 8.3% as you predicted it might. >> i appreciate you finding the one spot where i got it right. i actually think this is a solid, encouraging number to be -- you might not break out the party hats but if we can average 150,000 a month and maybe a few months where it takes above that, you will see the unemployment rate come down on a sustained basis if we can do that. >> starting with snen. >> can i ask you, steve, what was average hours of work? did that go, that's a key statistic. >> it's got to have gone up. >> talk amongst yourselves. >> austan, real quickly, you will see the unemployment number tick down but when, before or after the election? >> probably after, you know, if it's going to tick down before the election, the election is so

close. it would only tick down a little bit. i'm saying you got to have sustained job growth like we saw at the end of last year, going into the beginning of this year, over four or five months. it will start coming down. i mean there's no question about that. the two survey differences still lead you to be a little nervous that maybe there's one month blip type issues like what we had in the negative way in the last couple of months. >> labor force growth is 100 k to 125k. if you get consistent 150k -- >> slow. >> the other thing that will play the role -- >> fell by 150 this time. >> it fell and so did the employed fell. and unemployed rose. >> you had a sharper increase in the unemployment rate. i think what's interesting here is the market rallying and there was a debate what's the market want, strong job growth or the fed. >> right. >> i have this idea i've been thinking about which is a fed surplus. if there's a fed surplus then the market would rally on weak

news. i don't think there is a fed surplus out there. in other words, the fed responds to weak economic data and should be either at or below the overall effect on the economy. >> maybe people think it wouldn't be effective. >> this is perfect, though, for the market because the fed is focused on the unemployment rate. it's at 8.2 or 8.3. >> 8.3. >> and chairman bernanke point blank says he wants to move it south so this is a number -- >> you think this brings them in, mark? >> yeah. this is not enough. you get a another 8.2, 8.3 next month, that would be sufficient by his criteria. >> we were up 100 before, then up -- >> what are we now is. >> up about 127. >> we're up about 100. >> you think the market prefers -- >> no, earlier i was asking you did someone know this number was come, it was europe. it was up on europe and now another 20. >> the question comes does the market prefer to have bernanke give us qeen 3 or prefer to have 163,000 jobs? >> chairman bernanke did a

beautiful thing like draghi did. he put a floor. listen i'm focused on the unemployment rate. if that isn't moving south i'm going to ease and he's telling the market i'm going to be there for you and draghi did the same thing. >> i don't agree with you, mark. >> i don't think so. this is not a game changer. this number is not a game changer. >> i don't think so at this point. >> i think 40,000. >> that's the question, diane, we were asking yesterday, "the journal" said the interpretation, the translation of this whole thing if the market doesn't improve on its own the fed will step in. is that the case or is it a case where it's got to get worse for them to step in? >> i think it has to get a little bit worse. they're conditional, holding their powder dry until they can see the whites of the eyes of something that could be a big crisis. we do have these enormous risks out there and i do think they want to get in there but i think timing is really tricky when you're under this much political pressure, and also the way you do it really matters, the announcement effect matters, the timing of it matters, and it

just wasn't enough to do it, i mean the expectations on august were just ridiculous. i didn't understand it. >> from his perspective and i think it's appropriate, if you're 8.2, 8.3, anything goes wrong in the world you got a world of hurt. it makes sense to provide mormon tear easing in the context of the 8.2 employment rate that's not moving down. >> austan, you want to weigh in on this? >> the only thing i'd say is, everybody is waiting for superman here. the fact is, if we got the rates are so low already that no matter what happens to unemployment, i don't think the fed actually has that big of an impact on the economy, whether they engage in some more quantitative easing or more of the twist, whatever, i don't think it's going to do very much. >> i can push back on that? i think it's very important for financial markets, particularly the equity market, this is key and i think our economy is very keenly tied to the equity market. you can feel it everywhere in the world the day we see a lot of led everyone is depressed and

every time you see green everyone is happy. >> i don't think the history shows that it did very much. >> i would argue against that. i guess i would probably be on larry meyer, you had him on earlier in the week. >> that was interesting. >> that was a very interesting thing but i do think that the reason we've not seen more of a downdraft in financial markets is because the fed has been there, and provided the backfill. >> can i say draghi did exactly the same thing bernanke, in my view and interpretation, he's basically put a floor. he has said if yields rise, i am going to be there, and you can count on me. >> yep. >> austan, rick, steve, guys, thank you very much. diane and mark will be with us for the rest of the the show and we'll continue this conversation. coming up, reaction to the jobs report from ed lazear, former economic adviser to president george w. bush and on monday, goldman's rock stock,

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welcome back to "squawk box." the economy adding 163,000 jobs last month, more than expected.

joining us is former council of economics adviser chairman under president bush and hoover institution fellow ed lazear. good to see you, ed. >> good to see you. >> hopefully you've been watching, mark makes the point that if you go long-term and just do the math that there's fits and starts and there's a mean here and here is where we are up and down. we're up at about 150 over the last two years, and his point is, it's not great but it's not disastrous and enough to prevent us from actually seeing negative growth. are you in that camp? >> i guess i'm in that camp in the sense that the data and statistics are accurate. if you take the post trough growth rate and look at the number of jobs we've been adding to the economy and say how long does it take to get back at that rate you're talking three years before we get back to employment

levels that existed pre-recession. >> it's like 1.5 gdp and you know, above 8% unemployment, that's like i hate to think that's the new normal. >> i don't think it's the new normal. unfortunately it's been the new normal for the past year or two and hopefully that will turn around. there's no reason why in the long run you can't change in a. if you look at the current numbers i like to take a slightly longer run view. you look at the current numbers and say we're averaging a little bit over 100 for the past three months or so that's below the growth rate that we need to even sustain to the post trough average. there are some good pieces of evidence in the current report. the one thing i liked is the service sector, which is 80% of the economy, had some good growth this quarter, and sorry, this month, so i think that's the good news. the hours didn't move at all and when the economy is growing you

like to see the average weekly hours increase, that didn't happen. if you look at some of the other data, i'm a big jolts fan. one of the things that's disturbing to me, we've seen layoffs increase to the highest level we've had in the last two years, so that's a little bit disturbing. the number of hires we're looking at are still kind of the same level we've been at since 2009, that's not a great statistic. i see us muddling along. i don't disagree pretty much with what your panel was saying. this is better than the last two, but it's nothing to write home about. >> ed, it's diane swonk here. you're a great labor economist and one of the things that's been bothering me about all this is the length of time, we're now 41 months over 8% unemployment rate and the cumulative effects of that, dan sullivan actually now at the chicago fed. >> absolutely. right. >> a lot of good work on the cumulative effects of that and this huge number over 40% still on long-term unemployed. >> right. >> what do you think that's

having in terms of an effect on consumption and the long-term consequences of that? this is your expertise, something the fed is obviously concerned about as well. >> i think you're right on. i wouldn't look so much at the effect on consumption. i'd look more on the effect of individuals who suffered that long-term unemployment. you destroy human capital and the problem it's difficult for those individuals to come back. what i worry about is when you look at the trends, what that tells you is that people who are exiting the labor market may never come back so people who are in their mid to later 50s who would otherwise be working for another ten years or so, now may simply decide to stay out of the labor market and that's a lot of lost manpower and lost productivity. when we look to the future that's one of the really sad stories of this recession. >> this is mark zandi. >> hey, mark. >> why do you think we're not getting more hiring? what's going on?

layoffs ticked up but still low by historical standards. the real problem is hiring. why aren't we seeing it? >> yeah, well i guess what we did see of course is a substitution of productivity growth for hires over the recession, so that's a little bit unusual, although that pattern has been more prevalent in recent recessions. firms figured out how to make do with fewer workers so you don't see the hiring pickup at quite the same rate. if you look at the data, this recession does not look different from previous recessions in terms of its actual structure. it's just a lot worse and a lot slower. if you look at the amount of mismatch out there, look at what happens in construction, it led the increase in unemployment but it also is as significant in the decrease in unemployment. so it kind of looks the same as prior recessions, it's just a lot slower and we're not seeing the job growth or gdp growth we

need to see in recovery. there are a lot of stories you've heard from ken roguoff and others saying this is a financial crisis and could take longer. that could be the story but also could be policy issues and we'll see that play out in the next couple of months during the election. the unfortunate aspect of this is we really have not had a recovery. >> all right, ed lazear thank you, we appreciate it and your response to the jobs number. >> pleasure. >> we have yet to talk about the white house, what's going to happen. >> well, we were sort of. ed doesn't know. he's a labor economist. >> he has his views about all of this. >> he's a very good labor economist. >> he doesn't care -- he doesn't want to get political. >> what this all really means, how it's going to get spun. >> isn't it nice when people don't get political, separate their economics from the politics. >> you're doing it, instigating. you're a disruptor. >> i was just trying to suggest -- >> what do you think, you want to say what you think it means? is that what you want to, ask

you what you think? what do you think? >> i think we should go to commercial. becky quick? >> when we come back we'll head to the floor of the nyse and talk about what think of the jobs report this morning and the trading fiasco and try to get jim's take on the png numbers this morning. any way y. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor, right at your fingertips. [ rodger ] at scottrade, seven dollar trades are just the start. try our easy-to-use scottrader streaming quotes. it's another reason more investors are saying... [ all ] i'm with scottrade.

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welcome back to "squawk box" and the futures up 130 points after a 190 drop yesterday. look at the shares of knight capital, and the is the stocks are up after suffering sharp losses in the week. meanwhile, the nyse chief duncan need neiderauer says that it is neededed for better prices and they are monitoring the knight capital sich, and they have not created any claims related to knight. coming up the final thoughts from our guest hosts diane swonk and mark zandi. >> monday on squawk box, it is three months from election day. we will talk jobs and the race for the white house with political analyst and former congressman harold ford, jr. and we will ask morgan stanley's

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well, yeah. let's get some final thoughts from our guest host diane swonk,

senior managing editor of chief financial. and also mark san dirzandi at m chief economist. >> if you look at the gdp, it is right on the bls. >> and when you look at how many jobs are being added and how many jobs are losing and then you are looking at what the difference, and i mean we are talking about millions and mi millions of things happening and then you are down and we are parsing 20,000 here or 20,000 there, and you realize better to do a long-term look than it is to do anything month to month this is. >> yes, you have to, because of the data and the measurement issues. >> and the progressions to the mean and all kinds of things like that happening, right? >> and you might not see it smooth out for three or four months and then it finally does like you have seen over the last two years at 150. we were down the zero at that.

>> and then we got a rise, right. >> and then for a month we were at zero. >> i remember being on it and i said, i'm shocked and i could not believe it. what is going on? >> and the forecasting record, it goes with the whims of what happens and you have felt really smart. i remember a couple of times you said, you are the best at this. you hit the number exactly. >> and you have not said it in a while. well, i have to say i have been depressed for the last three months bark was the numbers have been bothering me, because the data is not consistent with other things that i'm observing so when it was not happening i thought if it happened again then i must have this wrong, but it feels to me like the e kcono is resilient and 150k is where we are. >> i hope so the greatest economy that the world has ever seen. >> and we need better, and i'm not arguing that, but in the context off what we are going through, it is not bad. >> and we are supposed to be resilient? >> yes. absolutely. >> that is the positive spin if you are president obama, you think that you can say this is a good thing? >> i'd say it is not good enough, but this economy is

moving forward and look at what we are facing and struggling with. europe is a mess. we have fiscal issues to nail things down. >> and your resolve yesterday as andrew pointed out, they got the act together yesterday, so we don't have to worry about europe yesterday, because draghi is on the case. >> well, i am sympathetic of it and they put a floor underneath it. >> i am on the other side. we need to buckle it up. sgh and we are going to burn. >> and he is on the other side? >> no, the apocalyptic side. >> that is when he is quiet when the numbers are good. you hear nothing from andrew when the numbers are good. >> well, i'm not sure if the numbers are good. that is what i am trying to figure out. >> just say they are good. >> you are going with that? >> 60 is good, yes? >> that good, but the household numbers weren't. >> so i promise you that romney will tell you they are bad. >> well,