joining us to talk about it is the bloomberg economic and policy correspondent michael mckee. talk to us about the gdp data we got. michael: it is a good news/bad news story. the good news is for the first time this year we saw gross in the u.s. economy with the third quarter expanding 2.6% in the u.s. a -- at an annual rate after two quarters of contraction. under the hood, not as good. consumer spending is positive, but much slower than earlier in the year. business spending is nothing to write home about, though it too is too positive. inventories were much lower and that subtracts from gdp. trade, net exports, the exports of u.s. trade in the third quarter was very high. imports fell. that contributed to gdp, 2.77% more than the gdp gain itself. durable goods orders are also out today. for the month of september, the last month of the quarter, we are seeing a slowdown, particularly for capital goods orders, things that goes into gdp as business spending, down .7%. it suggests all this will slow. the good news is if the fed is slowing the economy it should push unemployment

michael mckee is our international economics and foreign policy correspondent as well as an along joining us in studio. thank you for joining us. michael, going through the details of the report, wall street is interpreting this as good for the economy and bad for the market. what stood out for you? michael: in the unemployment rate falling to 3.5%. a big gain in jobs in the household survey, a big decline in unemployment in the household survey is contributing to that. it shows the fed will not get demand it down in the economy as quickly as it might have hope. however, we did also see the average hourly earnings drop a little bit, may be, because the biggest job gains were in lower paid, lower wage sectors. overall, it is sort of a status quo jobs report. john: an important point for everybody watching where wages go. anna, one of the points you made today is looking at not just who is in the labor force, but who is not and how that is contributing to the compensated story here. can you walk us through that? anna: the concerning thing about today's job report is that the labor force act

michael mckee tomorrow -- is there a press conference for johnston? there should be. . [laughter] jonathon: that is the news conference. futures are raised in the morning, losses now on the s&p. tom: it has been a relatively resilient market. michael: all it takes is a few more layoffs next week and the bear market is over. tom: are we done? let's go there right now. michael mckee, thank you so much. we greatly appreciate that. nela richardson, chief economist with adp. i want to cut to the chase and say the new emphasis on tomorrow's jobs report, what are you in adp focused on? >> good morning. i can't think of a better way to start the conversation with wages. it is all about how wages are driving or not driving inflation. that is what we are focused on. it seems to be a michael economist in a macro world. you are, you look at the collective decision-making from small to large firms. what we are seeing is that timing has been a very important factor in the entire dynamics of the labor market. we are now starting to see more people, at least according to the august re

kriti: michael mckee, we thank you as always.nue the conversation with our next guest joining me in studio. do you agree with mary daly that they are going to keep rates at that level for all of 2023 not making any major changes? >> at this moment, the fed it is their primary objective to communicate to the market that they are going to do that. she gave the caveat that if the economy goes the wrong direction and collapses, they will need to shift gears. when i look at what is priced into the market for next your, i think it's interesting that we are pricing in cuts. one could make the argument that we are pricing in a small probability of a very large cut which is consistent with what she has been saying and our take is that they are going to try to keep rates on hold for 16-24 months but it is unlikely they will be able to do that in practical terms. >> mary daly making the point that rates key in getting inflation back down to more normal levels. in your own analysis, that idea of inflation returning to 2% levels, any sense on

dani: thank, michael mckee.that report, the imf chief economist, pierre-olivier gourinchas joins us right now. you are writing the worst is yet to come. what does the worst look like? pierre-olivier: we just released our projections for this year and next, this morning, and what we are seeing in our baseline is that growth for 2022 will remain at about 3.2%. growth next year will slow down to 2.7%, 0.2% percentage cut from our july forecast. 2.7% is a fairly no number -- low number. to give some context, if you open the hood, we see one third of the global economy is going to be experiencing a contraction this year or next, maybe two quarters of negative growth. there will be a quite a big slow down in countries this year and going into next year. dani: you also point out that inflation is expected to cool in 2023 and 2024, yet, we hear from fed officials who say they will hike rates and keep them restrictive throughout next year. pierre-olivier, how important is that risk of overdoing it at the fed? pierre-oliv

kriti: let's get more on the federal reserve bloomberg international policy correspondent, michael mckee, from the federal reserve a d.c.. what can we expect from the fomc minutes and numbers out of the ppi reports this morning? michael: i don't thick we will have to square a lot because the ppi is telling you what neel kashkari told you, that rates will continue to go up, somewhat dramatically, until they get to a restricted point where they think is somewhere around 5.5%. we are still 100 when he five basis points below that. i think what the minutes will do is maybe summarize their views on how long they think inflation might be sticky or whether they even know how long inflation might be sticky. but underline the fact they will be focused on getting it down by raising rates. kriti: speaking of raising rates, we have to talk about the make of england. i want to ask about the contagion effect we might see in the u.s. bond market. the federal reserve might be taking note of, is that something they should be taking worried about -- should be worried about? michael: not something they sho

let's dive into the state of the job market with ed ludlow and michael mckee.have this in addition to a bunch of economics. and, i want to start with you. the day we get troublous claims, we are also getting information on palatine and amazon, with two distantly different hiring strategies. ed: i think it is also a soft indication of demand, especially around the holiday season. amazon said they will add 150,000 seasonal workers for the upcoming period, which matches what it did in 2021. it is interesting because that vote of confidence in demand is at odds with the sellers on amazon.com, bracing with the context of inflation and consumers suffering, for a pullback on online spending. palatine is a different circuit they're going through another major restructuring. $500 -- 500 jobs cut. they were not set up to operate in the barman of the pandemic. but they are very sick synced, to be breaking even on cash flow by the end of next fiscal year. kriti: taking pretty drastic moves to meet that. but let's talk about the economy broadly. we are still dealing with a

lisa: still with us down in washington, michael mckee.ng that this is setting us up for a hard landing, how is this going to be communicated? at what point have people talked about putting recession as the base case in the fed forecast? mike: i think a lot of people are putting recession as base case. the only real question is how hard it's going to be where you can't really get away with just raising rates anymore and nothing happens. the fed will be emphasizing the length of time they keep the fed funds rate at the terminal point rather than acquire the terminal point is. the market is re-pricing right now. it's hard to really put a finger on exactly where they need to go or how high they need to go. the estimate had been that it would be about four point 75%. some say 7%. but in that range. does this really change that is much as people might think? the fed knew that this would be a high inflation report and that it would take time for inflation to come down. wall street will debate the idea, but for the fed it's going to be more a que

joining us to discuss this is michael mckee. and the great pleasure of being joined by anna wong. what is the sum to five basis points number? anna: 75 basis points hike in november is pretty much sealed deal given how strong the labor reckitt is an that the participation rate is going down, -- labor market is that the participation rate is going down. kriti: doesn't seem that drastic of a different spirit why is the market reacting so aggressively. michael: the drop was unexpected. it is interesting because you had a big gain in employment and a big drop in unemployment, a swing of 500,000 workers between the two. i have been trying to figure out what is going on is that what we are seeing is companies are trying to backfill employees, vacancies they have had for a while, they be fewer but still trying to fill vacancies but holding on to workers because it has been so hard to find them they are not letting people go that may be the reason we so that kind of swing in the unplanned rate go down. guy: how are you thinking about this? that's this change anything about your expectatio

joining us is michael mckee. we got some high numbers. ularly for the u.k., 10.1% for the month of september.

haidi: mary daly, san francisco fed president speaking with bloomberg's michael mckee.nnie: opec-plus members agreed to cut total output by 2 million barrels a day in november to keep isis higher. outdated baselines mean actual cost will be lower. the white house slammed the decision and will release another 10 million barrels from the strategic oil reserves in november. the eu commission president says the market is intervening in the russian gas market on capital -- on capping -- intervening on gas prices. north korea fired two suspected short-range ballistic is on thursday, making a total of 10 lodges in fewer than two weeks, one of the biggest test barrages under leader kim jong on. it came after pyongyang condemned the biden administration for escalating tensions as the u.s. ronald reagan your cap carrier you turned in waters east of the korean peninsula. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ kathleen: thank you, vonnie. up next, we have kni

. ♪ alix: i want to send it over to michael mckee with the san francisco fed president mary daly. ael: president bailey, thank you for coming in today. let's start with the key question. are you going to pivot and will the fed changes rate hat because the markets are nervous? >> we are resolute at raising the interest rate into restricted territory so we can bring inflation down which is causing millions of americans to suffer real pain. it's also very damaging to the economy to have this level of inflation. we are committed to bringing it down and staying the worse until we are well and truly done to stop michael: you said the futures market goes up and comes down next year but you think that's wrong? >> i don't see that happening. ics is raising to a level that it will be restrictive enough to bring inflation down and holding that until we see inflation truly get those to 2% and demonstrate that price stability is restored step michael: what level is restrictive enough? >> we just got the right to where it is restrictive just a little bit so i would see more to encourage position

michael mckee joins us to discuss, as does our u.s. rates strategist ira jersey.on't be concerned about this question, but is there rates market a significant source of instability right now? we are all over the place here in the u.k. and to a certain extent in the treasury market. we are repressing the fed, qt, how unstable is this market and do we need to worry? ira: i think we have to worry a little bit because liquidity is significant numerous that it has been in the recent past. in large part that is because of the uncertainty that you note. there is also the inability for a lot of market makers and other potential intermediaries to take risk. we have a market that is significantly larger than it was a decade, even 15 years ago. the purchase agreement market, the other markets, the plumbing for the treasury markets, have not grown nearly as much. if you look at the funding markets as a share of the treasury market, they are the lowest they have ever been since the 1970's. i think part of the reason you see this volatility is you don't have smooth functioning

to introduce to -- as to them we have michael mckee, the bloomberg internatio

mike, appreciate it, bloomberg's michael mckee. get more market reaction, u.s.pi data, the moneta chief investment officer is here. what do you deal when this is going harder, faster and longer? aoifinn: if you look at the numbers from lael brainard, they're looking under the hood come out the transition of their tightening is having an effect on the different sectors. they're looking at the retail sector come out housing sector, maybe an area that is looking at the mortgage rates that have doubled over the course of the year. they want to see inflation coming down across the board. they want to see it happening first and it is starting to happen. architect to understand that. -- markets have to understand that. guy: i appreciate that we are seeing it moderating in important areas. the problem is we are now seeing it pick up in other areas, mainly the service sector where it is more sticky, problematic and more difficult to get rid of. isn't that the mission we are looking at -- sorry, the transition we are looking at now into services inflation and that could b

. >> mary daly, the san francisco fed president, speaking with bloomberg's michael mckee.inue to see the dollar strength becoming the key narrative again, as we get more assurance from the fed speakers like mary daly that they are staying on course with their tightening regime until we see meaningful inflation coming down. we are seeing the pullback when it comes to sterling. the pound sinking more than 2%. traders piling back into the dollar trade. expecting the fed will be sticking to the commitment to hiking rates. no pivot just yet. we saw a bit of a reaction from the u.k.'s lives trust at the annual party conference overnight. watching the aussie dollar as well, falling under 65 u.s. cents there. seeing a little bit of strength this morning when it comes to trading in the aussie. the kiwi dollar, tempering somewhat, getting as much is 1.3% earlier after the big move from the rpm fed. we continue to really watch the situation when it comes to the dollar yen as well. we are seeing a little bit of weakness in the yen with the bloomberg dollar index strengthening. potenti

michael mckee is with us here to break down the numbers as we get them. now. it looks like a little bit less on expectations, down from last month. 8.1% decline on a month over month basis on housing starts. 1,439,000. the expectation was for 1,461,000. building permits, coming in at 1,564,000. that is better than expectations. they revised it here. 1,500,042. it shows that builders have some business left to do. i was going to say some confidence, but we saw the homebuilders index yesterday fall to the lowest since the 2008 financial crisis brought on by housing. it doesn't look like they have a lot of confidence but they have a lot of backlogs, are pulling permits, would put some of those permits into the ground. lisa: you are seeing the two year yield breakout to the newest ties going back to 2007. you can see the dollar gaining, the opposite effect. what is good for stocks is good for bonds. what is bad for stocks is bad for bonds. this really speaks to what you been talking about which is how much are people looking at housing, the resilience. .7% ri

let's get to michael mckee for more. >> good morning. this may be good news.rmula and we don't know how it changes friday's numbers. 208,000 jobs on the adp payroll creation during the month of september. that is up from the 185,000, which is the revised number for august. it is sequentially lower. it's what the fed kind of wants to see. i get that's what the markets want to see. what does it tell us much of what job creation will be for the month of september, scarves government payroll numbers? that's hard to see. -- hard to say. most are created in the medium-sized company category. we did see 13,000 manufacturing jobs go away, which kind of is in line with the numbers, which fell below 50 this week, the manufacturing numbers. we will see how much validity this report has come friday. jonathon: can we pick up on a data point that came out a little bit earlier this morning? mortgage implications down by more than -- applications down by more than 14%. your reaction to that? michael: i'm not surprised, but what it does look like is a real pull back very quick

michael mckee was breaking them down.e clarified residential investments subtracted 1.37% from gdp heard this quickly moving story. under the hood, how much our other inflationary components offsetting some disinflationary moves we are seeing in the housing market, retail, used car prices? you can see on the margins around the economy? nathan: very clearly, we are now in a dynamic of disinflation in terms of -- prices. that is clearly happening, we expect it is going to come off sharply in the coming months. similarly, the shelter prices are persistent the way they are cap related in the indexes. we are getting these monster declines in residential investment, that is pointing to a soft housing market. where the heart of inflationary pressures remains is in the non-sheltered services. that is tied to the hot labor market, rising wages and rising services inflation. that is what the fed is worried about. that is what the fed is targeting effectively, they have got to see a more contained number in terms of non-sheltered se

mike mckee brexit out -- michael mckee breaks it down.in the month of september. last month they were up .2%. you have a point -- a .1% gain. retail is up a healthy .4%. he autos, gasoline, the things that are coveted in other areas of gdp. looks like a healthy gain of 4% -- gain of .4%. let's take a look at what moved. tessa lane is likely to be down. gasoline stations were down 1.4%. that is not as bad as the 5.2% decline the prior month. looking at motor vehicles, down .4%. gas and motor vehicles are dragging that headline number down. food is up .4% on the month. health stores up .5%. general merchandise is up .7%. general stores, .3%. retailers decline in august but rose have been percent -- rose .5% in september. a fairly wide range of solid gains in retail sales. economists have been pointing to numbers from the major banks showing people still have significant deposits from last year's stimulus and still using credit cards to buy things. right now the consumers are hanging in there, also probably a function of the fact that job gr

michael mckee is here with that data.or the markets and for economists to figure out how this fits into third-quarter growth. september advance goods trading balance. a lot worse than anticipated. $92.2 billion. i guess you could call that down, wider than the $87.3 billion in august. retail inventories coming up .4%. wholesale inventories, 0.8%. both are lower than the prior month but still a gain. when you look at retail and wholesale inventories, they are running way ahead of where they were in pre-pandemic years. that does suggest we will have some more growth added to the third-quarter numbers. it also takes away from the future. it may give us some break on inflation if we see retailers cutting prices as they have been to get rid of their stocks. housing, the mortgage bankers association, mortgage application index falls 1.7% in the last week. that is down from the 4.5% drop the week before. when you look at the overall index, it is now the lowest since 1997. people are really bailing out of the housing market. hard