'Bloomberg The Open' Full Show (07/07/23)

this was the first downside surprise on a payrolls report in more than a year live from New York City this morning good morning good morning with Equity Futures slightly negative the countdown to the open starts right now everything you need to get set for the start of U.S trading this is Bloomberg the open with Jonathan parrow [Applause] [Music] thank you coming up the U.S jobs report coming in soft with global yields nearing 15-year highs and the FED on the brink of hiking once again we begin with EPS shoot payrolls in America you have to you know pay attention to the data payrolls jobs data labor market data labor is the key labor Supply is going to be hugely important and employment picture is probably the linchpin that we're all looking for New Market remains quite resilient labor markets have to soften you really need to see the job market start to crack we haven't seen anything cracked yet the stronger the data comes in the more aggressive the FED ultimately needs to be we're still worried that fed needs to do more instead of taking everything into account they're going to have to continue to hike until they break labor the FED has to break the labor market If the Fed is looking to loosen the labor market we're just really not seeing that in the data the employment story is still very strong at the end of the day this is going to be a big concern for the Fed what about that ADP report joining us now to discuss the payrolls report Muhammad Al Aaron of Queens College Cambridge and blackrock's Rick reader gents wonderful to catch up with both of you Mohammed first to you your response to that jobs report 31 minutes ago good morning John three responses from the specific to the general one is despite the Miss on job creation this will not get in the way of the FED hiking in July it will moderate expectations as to what happens thereafter but the wage growth the labor force participation in the unemployment rate that these three things means it will hike in July two is the craziness we're seeing in the fixed income Market where the two-year has been all over the place and God bless Rick for navigating this Market um the craziness we're seeing there highlights not just the regime change but importantly the lack of a policy anchor and then the final thing is something that's not discussed often enough is that if you look at the details of this jobs report it indicates that it is the most vulnerable segments of the population that are at risk right now God bless Rick Rader Rick what's your take I appreciate that a lot the uh listen I agree with everything Mohammed Said you know it's a solid report though I mean yes it was a little softer on the headline that the wages were up to work week was up and uh you know I mean you're operating at 3.6 unemployment rate we just had claims data that continues to show that Labor's in good shape you know Joel stada was a little bit encouraging and that private was coming private hiring was coming down a little bit but boy you're still talking about a lot of jobs open so anyway I think it's you know I think you got to parse it uh quite quite finally to say it's softer I mean it's solid I mean the economy is solid and employment data is solid and agree with Muhammad that listen the fed's gotta Gonna Keep moving on the back side of this and to be clear the bond market is of that opinion as well yields Are Climbing higher Now by two basis points we're about to be five percent on a two-year initially off the back of the downside surprise on the headline number yield to a lower they've popped back you look through the rest of the report Muhammad to Rick's point you've got the average Ali work week that's just a little bit longer unemployment a little bit lower wages coming in a little bit softer Muhammad where are you now which Camp are you in on the fomc are you of the opinion that there are long convertible lags to policy there's enough in a pipeline or if you were on the committee would you be pushing for more to do more hikes John it depends what's anchors this committee and you've heard me say this over and over again if this committee is anchored by we've got to get a two percent Whatever May and Central Bank policy is the only tool being used then they're gonna have to hike at least a couple more times because they're highly data dependent if however they step back and have a more strategic view of the economy and recognize that we have issues on the supply side and that crushing demand to address supply issues isn't the right thing at this stage but it means accepting a much lower trajectory or decline in the inflation rate um they they would hike once and stop but you know this the problem and you've heard me say this is that when you excessively data dependent you'll swing all over the place and with that markets will swing all over the place and then the risk of something breaking goes up well they have been in the bond market big time Mike McKay's with us to break down this report might McKay the headline disappointing but beneath the surface this is a mixed one it is a mixed one but it might be as we were talking about on surveillance a few minutes ago a turning point uh 209 000 jobs is still a very strong report so it's not like we've fallen off a cliff here and we're well ahead of the a number of jobs we need created to absorb new entrants into the labor force and as you guys were just talking about we're at a 3.6 percent unemployment rate hours worked went up and average hourly earnings unchanged on the month after being revised up for May so you have some strength in this report but it does raise the possibility maybe that we are now slowing down to a sustainable level and it will keep the idea of a soft Landing in play you take a look at where the jobs were and weren't we knew housing has been very strong uh new home construction very strong construction up by 23 000. government up by sixty thousand there could be a seasonal component to that and that is probably not going to continue in you look at retail are we seeing a Slowdown in retail sales we've seen a bit of one and so is this a precursor to what's going on and then everybody likes to look at temporary help because that's usually seen as a sign of what's going to happen going forward with the labor market now I'm going to switch gears and go to inflation because that's the big number next week this is the Cleveland fed CPI nowcast and as you can see it tracks pretty well with what's happening on CPI and it does see a big drop next week to a little over three and a half percent which would be uh signed to the FED that they are making progress the interesting debate is going to be how much of an impact wages are having profits have fallen off and there was all a talk about greed inflation but wages are still high so are wages creating inflation that's going to be the question for the fed and of course they're arguing maybe not Matt McKay thank you sir Rick Rita let's get into it payroll's behind us CPI in front of us us we've had a disappointing read of the headline number we talked about the nuances around that the rest of it's pretty solid CPI next week what would need to happen to stop the fed from hiking in July I mean I think it's really pretty hard to stop there from hiking I mean we think it's going to be a softer number I mean some of the some of the high exogenous influence you've had from used cars shelter you know shelter comes down with a lag we think that is going to come down and we think you'll get a softer number I think the markets anticipate that already uh but I think it'll be pretty hard unless the number was extremely soft which is hard to believe but Santa Fe is I mean I think you got to take them at their word they pause we could debate was it was it an effective deposit or not no boy it would be it would be pretty difficult given all this Labor day that we got that we've just we've just received it'd be pretty hard for the to take the FED off the mission at least for this meeting we could debate we can debate future meetings well Mohammed let's talk about future meetings this is what Andrew honors the city had to say this morning risks of rising the FED will once again need to deliver a more hawkish message perhaps at Jackson Hole in late August and or the September fomc meeting Mohammed I think for a lot of us we're less interested in July maybe even less interested in what September might bring it's really about whether they need to go much further than that never mind 25 to 50 basis points do you have an opinion on that yet so that's why the disagreement is John um I think most people expect they will hike in July there's one or two outlayers but for the reasons that Rick just said they will hike in July and this is despite I want to stress I also expect next week's CPI number to be quite soft we may get very low in the threes um but look at core core is going to be critical because of the changing dynamics of inflation the fact that inflation has now migrated and is well embedded in the service sector that is the concern as to what happens thereafter inflation will prove sticky cold will be sticky and the FED is going to have to choose can it live with a three to four percent inflation rate that it's stable or does it want to crush the economy to get to two percent that's the choice that they're gonna have to make later in the year and that's why people are all over the place because the expectations of the real economy is quite different as you know I've I've always thought a recession need not happen that this economy is strong enough to avoid a recession but a lot will depend on how the FED plays it well to be clear you've also suggested Muhammad and you've insinuated it there that they'd have to tolerate higher inflation to make sure that recession doesn't happen is that still the case yes John I don't think anybody can deny what's happening on the supply side um we're seeing significant deficiencies of aggregate supply they're happening from the rewiring of Supply chains they're happening from the jail politics they're happening from the Euro from the energy transition and the labor market itself labor force participation has been stuck and we're not attracting more people in in the labor markets so we have issues on the supply side and this notion that we've got to crush them on we've got to Cross jobs to address a deficient supply side for me that's not good economics we've got to address the supply side and make it more elastic let's talk about a bond market that's been crushed as well 10 year right now three four percent two year right now around five percent Rick as you look across that curve right now what's a buy for you like commercial paper you know yeah we're buying I mean it's pretty incredible you can buy six month to one year commercial paper we bought some this this week at uh six point six percent yield good good issuer no by the way not a flavor I mean it's pretty attractive I mean if you can clip in CP if you can clip sixes and uh you know you're seeing Banks you're seeing others that are good for companies for working capital that are issuing their that's pretty darn attractive listen I think you still got to be a bit patient on uh on the rest of uh on the rest of the curve um and uh you know let it do what it's you let it do what it's going to do I mean to take a lot of duration risks today doesn't doesn't strike me as awful lot of awful lot of sense we've got to tell you some more out of here than that Rick are you saying this still looks at risk on that tenure right now I mean I do I mean you know you look at by the way you you operate in a bond markets in a global framework you know the bank of England is hiking the ECB is hiking by the way there's a lot of DV there's a lot of durations at EVO One there's a lot of duration that comes into those markets the U.S treasury's got to issue a lot of that I mean by the way look at the amount of bills that are that are coming to Market every week it's not like we're running out of Supply to purchase so um listen I I think I think rates can move a bit higher from here you know do you start wading into some places you know some of the some of the credit markets I think are okay the mortgage Market I think is okay and you know I think it'll perform reasonably well but I don't think there's any race I remember we were on a couple of months ago and we're talking about and somebody was saying we're going on a recession you got to get into today I don't know I don't I don't think there's a race we were talking about credit crunches and banking failures right only a few months ago and look at us now Muhammad the UK end of September list trust is in number 10 Downing Street we're talking about financial instability and bomb Bank more QE potentially from the bank of England and rates then on a two-year guilt yield we're through 470 right now they're looking at 550. Muhammad have we walked away from the financial instability of the last 12 months a little bit too quickly do we need to keep an eye on that we do John I mean what's happening in the UK is the amplification of the inflation problems um all over the advanced World inflation that is more sticky is higher and the bank of England's got to go do even more add to that that the real economy is weak so this is probably the most difficult policy challenge out there and you have now the society is literally gripped by interest rate fever everybody's talking about mortgage rates everybody's talking about what's the bank of England going to do it's not limited to Bloomberg anymore it's everywhere um so it's going to be really interesting as to what happens to sentiment I think the main issue now John is that while we've navigated interest rate risk relatively well notwithstanding what happened in March but we've navigated as a whole relatively well the big question is do we also have to navigate credit risk that is I think the big question in the UK the answer is more yes than anywhere else in the advanced World Rick what's your response to that for the U.S I mean listen I mean I think I think you got to be a bit careful about uh you know as rates continue to move higher I think you got to be a bit careful about the levered parts of the market whether that's leveraged loans whether obviously commercial real estate has been well established you know we're going to take uh we're gonna have more pressure on the biking system there is no question about it uh you're gonna you're gonna continue to lift the cost of deposits you can't build Capital so I think there's going to be you know an increase of uh of some stress in some places but you know you look at you know there are also a lot of the investment grade markets turned out it's dead I mean the housing market is uh you know consumers to pay down their debt so it's gonna be bifurcated but you're definitely going to have in the stress Parts where there are interest rates sensitive there are there's definitely some credit stress that's going to continue to come we'll build on that in just a moment Rick Muhammad you're going to stick with us equities right now just a bit softer on the S P 500 negative by zero point two percent going into the up and about coming up President Biden promoting his economic agenda I'm not here to declare Victory on the economy I'm here to say we have a plan that's turning things around quickly we have a lot more work to do the latest from Washington DC up next [Music] the share of working age Americans in the workforce is as high as it's been in 30 years remember they used to say blind spend all this money to keep people from working people are off the sidelines and folks it's no accident it's by nomics in action President Biden promoting the impact of his economic agenda in particular highlighting the labor market arguing against the outcome of his legislative accomplishments as the June Top Line payroll's number comes in lower than expected Bloomberg county lines joins us now with more hi Kelly hey John lower than expected and yet we still haven't gotten a statement out from the White House but you could expect that they are still going to spend this in the positive direction because a 209 000 that is still relatively robust payroll's growth and brings the total even further above 13 million jobs created since President Biden took office this is something he has continually touted also the unemployment rate as well just last night the president was tweeting how unemployment has remained below four percent for the longest stretch in 50 years so that ticked down to 3.6 percent evidenced in the data today likely something the president is going to flag as well as the stronger wage growth the idea that Americans are seeing their wages moving up to compete with the higher costs that they are fleecing facing though of course in recent weeks the president has repeatedly been trying to push the message that he is assisting in getting inflation down through things like the inflation reduction act also touting things like infrastructure packages and the chips Act of course the difficulty for this Administration John and for this re-election campaign of President Biden is despite a economy in a labor market that still is looking very tight and quite robust it is not translating into his polling a new Economist you gov poll came out just yesterday that showed the president has just 42 percent approval on his handling of the economy 52 percent disapprove and actually the average according to Real Clear Politics pulling over the course the last month is even lower than that at 38.7 percent approval so if indeed the FED after looking at this data hikes once again this month Titans policy further and we start to see that deterioration in the labor market uh taking shape later this year into 2024. that's getting closer and closer to when voters are going to have to head to the polls and decide if they want to vote for this president again John Kelly thank you the latest from Washington will build on that with the acting Secretary of Labor Julie Sue in about 20 minutes from now back with this for a final word Muhammad al-airin Rick Rita back with us now Rick you mentioned this about whether High interest rates were actually biting into this economy or not Mohammed toasten's lock of Apollo wrote about this this morning where it's taken the Fed so long to slow the economy down pointed out a number of reasons his three a high Savings in the household sector post covet went on to say during the pandemic high yield investment grade corporates extended the maturity of their loans U.S households have 30-year fixed mortgages they're therefore less sensitive to Fed hikes Mohammed from your perspective just how rate sensitive is this U.S economy so he's absolutely right initial conditions matter and the initial conditions were such that we had strong household balance sheet and strong corporate balance sheets so monetary policy hasn't hit but John we are the Envy of the rest of the advanced world I was sitting with the European politician yesterday and he was complaining that foreign direct investment is going to the U.S including European investment is going to the U.S so we mustn't forget that this economy is in relative term outperforming many other economies and therefore when people live in relative space as they do most of the time they will come to the U.S Rick does that shape your approach your bias geographically in markets at the moment uh yeah by the way I'll say one thing I mean you know I think I think when people talk about you the FED just keep going if you think about where we are most people are sitting in mortgages that they locked in at the three percent four percent so that's not interest rate sensitive the companies that are growing Healthcare and Tech are not big borrowers what ends up happening is once you just keep raising interest rate all you're doing is you're impacting the the lower end of the income strata in fact people I a render Savers and they benefit from it and the people are actually hurt by it I just don't feel like to raise interest rates one man's opinion now to your question listen I do think the U.S is particularly in equity space the most uh the most attractive place by the way in globally from a debt perspective I actually think em is interesting although we've been talking about for a few months now it's had a pretty good run but you know the EM central banks got out hiking earlier and you're seeing inflation coming down I actually think em is uh in Latin Max Brazil are actually interesting places to invest but generally I would say U.S is interesting the credit markets in Europe are the are the other place though that I feel like you're getting paid for taking the risk and we think the default Paradigm will be reasonably low there but uh so anyway I would say that that shapes it generally well you took us there let's sit on it yeah Mohammed that's your world particularly with your work with Gramercy what's the big one for you at the moment I think being highly selective um Rick mentioned a few places that are interesting you've got to be highly selective higher in quality overall and then look for the overshoots look for a situation where the market goes too negative that certain cases right now that are trading at ridiculously low levels um but the bottom line for me is highly selective highly differentiation differentiated because there will be a lot of dispersion going forward I have to say Rick and I want to be where you are Muhammad it looks very relaxing wooden cabins that is true no no comment from this end of course hopefully hopefully no screens on thanks for being with us Muhammad we appreciate it read it to you as well sir thank you on this payrolls Friday just breaking down a really nuanced report what it means for this fed for this fed looks like a hike in July but for a lot of us it's what happens after that further down the road how do they set the stage for policy to Muhammad's Point strategically going forward from here beyond the September meeting equities right now just a little softer going into the opening bound about eight minutes away we're negative 0.2 percent on the S P 500 in the bond market yields initially much lower following the jobs report then they popped higher again we're just south of five percent on a two-year maturity on a 10-year we're still three four percent yields A Higher by four basis points as we're in the FX Market the Euro trying to gain some traction through 109 just sitting above that level at the moment at 109.09 on the Euro against the US dollar coming up on this program the morning calls in later more on that downside surprise in the payroll support we'll catch up with Victoria Fernandez and P Jim's Michael Collins looking forward to that conversation and this one too Julie sue the acting Secretary of Labor the White House response the government's response Washington's response to this labor market report of the last hour or so from New York this is Bloomberg foreign [Music] [Music] it's nothing like ADP from 24 hours ago one hour ago we got the payrolls report headline number comes in a little bit softer unemployment though lower weight is a bit hotter average working week a little bit longer Equity is a bit softer down negative by 0.2 percent on the s p and the bond market Yota down we're back up again they're pretty steady now the front end of two year almost unchanged at about 4 97 after going through five percent just before the payroll to print a little bit earlier this morning the surprise action let's get you some morning calls first up JP Morgantown Chronicle monitor neutral seeing limited upside as the next U.S election cycle approaches Barclays upgrading Newmont mining to overweight highlighting the Stock's attractive valuation and recent underperformance and finally wolf research upgrading JP Morgan to outperform saying shares deserve a premium given the bank's favorable loan mix their stock is up by 0.4 coming up the U.S labor market softens in June more on the latest payrolls Report with across my Victoria Fernandez and P Jim's Mike Collins that's next you're opening bell just around a corner [Music] [Music] seconds away from the oven and bound this morning good morning to you all a couple of data losses on the s p no big drama but the S P 500 yesterday biggest one-day drop going back to late May incidentally right now Futures softer by 0.2 percent on the s p on the NASDAQ down bike 0.1 all of this following downside surprise on the payroll support about America let's open in Bell switch to the board and get to the bond market this is what the bond market looks like now you'll Tire initially lower we're up by three three four percent in the last 24 hours first close above four percent on a 10-year poster collapse of svb Left Behind that very quickly didn't we let's see if that comes back on the table anytime soon the FX Market the Euro reclaims 109 109.09 on that currency pair the Euro against the dollar positive by 0.2 percent and crude lower down negative by 0.4 71 and about 50 cents about 25 seconds into this session here's the broader market for you we're down lower by 0. 0.3 percent on the S P just a bit softer on the NASDAQ One stock to watch at the open is meta Twitter said to be threatening legal action following the launch of threads in a letter to Mark Zuckerberg posted by semaphore Twitter's attorney writing Twitter demands that meta take immediate steps to stop using any Twitter Trade Secrets or other highly confidential information Abby has more Abby hey Dania never dull day here for big Tech and of course in this case it has to do with uh Tesla and Twitter's uh Elon Musk versus Mark Zuckerberg of uh meta Instagram and now threads and it's threads that's a question on Wednesday when the app first launched 2 million within 2 million users within two hours then 5 million 10 million 30 million So Yesterday Twitter sent that a letter to Metta Alex Spiro Twitter's lawyer known as being super aggressive uh basically said that meta has hired dozens of former Twitter employees who may have access to confidential information they're threatening that trade secrets lawsuit uh saying that they will strictly enforce its intellectual property rights it's highly confidential information it's very difficult for this sort of a plant plaintiff to succeed ultimately they may actually be looking for an injunction which would also be difficult another question would be because meta responded saying that Twitter Engineers are not on the threads engineering team would they have to prove that there's some sort of Chinese well so many unknowns but we do know John on the day we have meta up slightly Twitter's up a bit more excuse me Tesla the proxy for Elon Musk up 1.4 percent on the year Tesla up 125 meta up 143 percent probably the early stages of the fight but again they will probably be looking for either an injunction or some sort of monetary damages but how do you calculate uh the future and what it could mean stay tuned Abby thank you you mentioned Tesla let's turn to Elon musk's other company in the news as well providing fresh insensitive potential buyers in China running the following buyers will get 3 500 yuan in cash and a 90-day free trial of enhanced autopilot if they make the purchase via referral from another Tesla customer and take delivery within a certain period edlado has more money yeah good morning John tester is up 1.3 several pieces of news the near-term driver of the stock is news crossing the Bloomberg terminal in the last 20 minutes that Mercedes-Benz is joining Tesla's charging standard here in North America from 2024 Mercedes-Benz customers will have access to the supercharger network via an adapter a Mercedes like many and others in this industry later offering an engineering fix or production fix to to match that standard while also building out their own network the piece that Bloomberg reported overnight in addition to what you said on China incentives is that Tesla started making some Workforce reductions on the battery team in Shanghai according to sources there are 20 000 people that work in that Shanghai plant what we're talking about is individuals on the team that take the cells from third-party suppliers and assemble them into modules and packs one source told us that an element of this is because there are there is an aspect of automation that can replace some of those jobs but this comes at a time where we are talking quite a lot about the price War quote unquote in China and the compromise that was reached in the last 24 hours the third piece of news very quickly mizuo raising its price Target on the stock to 300 from 230 dollars maintaining a buy rating if you're a Bloomberg terminal user go on anr and just take a look on the top right hand corner of the screen the average 12-month analyst price Target is 22 255 Tesla trading at 279 currently and you you'll see that since the the news flow around other automakers joining the nacs standard charging standard that's where the stocks really taken off but it's taken time for the sell side to catch up in that respect we're now kind of on an upward trajectory in terms of how the sell side see this stock going uh currently John and you made three points let's pick up on the second one just the customer workers in China can you build on that a little bit more can we read into anything about demand potentially in that country given where deliveries came in so well in the last few months the the the use of price Cuts as a lever based on the latest quarterly delivery production and delivery data indicates that that did work in a market like China uh where there are many more domestic players offering a wider range of battery electric models byd is a great example right where in that country they also sold more than 300 000 battery electric units and if you extend that to plug-in hybrids more than seven hundred thousand what I've learned in speaking to sources is that it is normal in all of Tesla's facilities for them to review the structure of the organization and just make logical changes trim teams or reallocate headcount and we did report according to sources that those battery module assembly members that the jobs were removed were offered in some cases chances to move to other teams in the facility and again 20 000 people work in Shanghai John for Tesla and that plant accounts for more than half of output last year so it's kind of shuffling the deck but it is worth tracking the mind sure of what's going on there stock is up about one percent Ed thank you the latest on tester there and Elon Musk I want to turn to the financials going into earnings next week wolf research upgrading JP Morgan to outperform downgrading Wells Fargo to peer perform whilst Fargo management has executed well but shares have outperformed and valuation has converged with peers while our JP Morgan upgrade is far from contrarian We Believe guidance will prove conservative back with us for more haitianali good morning John you're taking a look at Wolf research look at two of the banks that are trading better than any of the banks in the system as far as the top six goes listen when you take a look at Wells Fargo wolf researchers move here goes against the grain 70 percent of analysts still say buy Wells Fargo but what they're looking at here are the risks on the horizon commercial real estate risk regulatory risks the reason the timing here is interesting also John is because you have Wells Fargo and JPMorgan are two of the banks that raise their dividend among the most of the big Banks as well so they're giving something back to shareholders they are performing but with Wells Fargo trading at about Book value you have wolf research now telling you maybe Book value is just enough JP Morgan's case is the bull case and JP Morgan's case applies to other Banks as well here John it's the idea here that Capital markets not necessarily all Investment Banking and trading but the return of capital markets IPOs debt underwriting will help Banks like JP Morgan and Bank of America moving forward that is the money case of the second half according to Wolf research nationality leading our coverage starting in about a week from now you get some rest this weekend thank you looking ahead to JPMorgan results next week before we get there of course the CPI report behind us already today earlier this morning the payrolls report stocks waivering treasury yields near 2023 highs after a colder than expected payrolls report at the headline Mohammed al-airian wank in earlier in the program despite the Miss on drop creation this will not get in the way of the FED hiking in July it will moderate expectations as to what happens thereafter but the wage growth the labor force participation in the unemployment rate that these three things means it will hike in July two of the best on this let's get straight to it cross marks Victoria Fernandez Pete James Mike Collins Mike first to you buddy your thoughts on that payroll support an hour ago yeah Jonathan I think it's a really simple message consistent with our view that economic growth is moderating uh labor force growth or labor growth is moderating wage growth is moderating but it seems to be stuck kind of in the four plus percent area which is a little problematic that's probably 50 to 100 basis points higher than the FED wants to see wage growth uh the breadth of Labor Market uh is is waning right you're seeing the gains really in a few sectors now which is kind of a leading indicator of maybe weakness ahead uh but there's not enough leverage in the system uh for a big hard Landing right so you're going to see a moderation and growth a moderation and inflation uh the FED is going to hike uh in three weeks from now 19 days from now I think that's a done deal but uh the threat of a hard Landing is really low here is it a done deal Victoria from your perspective I think that at the July meeting we're definitely going to get a hike at that point you've just heard some of the the hawkish talk from the FED even just from the last meeting talking about the expectations of at least two hikes and so I think given July and the jobs report that we've seen I think it is a given the labor market is key for them because it has the average hourly earnings and labor cost is what's keeping inflation along with rents but it's what's keeping it sticky right now so they're trying to figure out how can they bring those labor costs down you have average hourly earnings up 4.4 percent year over year as mics use the word stuck for that then I think that's a way that the FED is looking at it they're stuck right now and what can they do to improve it because look at some of the other elements of the labor market Jonathan you've got quit rates that were up in the jolts report yesterday you've got longer term averages that are coming down continuing claims we're at a five month low so you've got elements that are telling you this is still strong and the FED has more to do the work week lengthened so let's talk about what we've been got in this bond market now two-year just south of five percent 493 tenure at the moment just north of four percent Mike Collins how active have you been this week is that a Buy on a 10-year at four percent yeah we uh as you know Jonathan have been have been short duration here for for a couple of months uh really since the the dust settled on the regional banking uh crisis mostly in the belly of the curve so long kind of cash and and a little bit long the very back end but that whole intermediate part of the curve is is again pricing and still probably too many uh aggressive rate cuts too soon so we've been short that but with this big backup in rates as you mentioned I mean the five year is up a hundred basis points really in a couple of months five-year uh real rates are up 100 basis points uh the numbers here that four handle on 10-year treasuries is starting to get more appealing we believe we're going to be in a Range say 3.5 to four and a quarter on the tenure as you get toward that higher end of the range you have to cover that underweight and we've been doing that we've been reducing uh our underweight really in in duration interesting let's keep building on that Mike Collins Victoria Fernandez they're going to stick with us we'll work through this market price action yields near five percent on the two year in the last 24 hours we're back away from that equities right now just a little bit negative coming up a downside surprise in the payrolls report we are the Envy of the rest of the advanced world we mustn't forget that this economy is in relative term outperforming many other economies reaction down in Washington up next [Music] live on Bloomberg TV and radio I'm Jonathan Farrow joining us now from Washington is Julie sue the acting U.S Secretary of Labor responding to the labor market report from about an hour 15 minutes ago secretary so fantastic to catch up with you just your first reaction to the payrolls report from earlier this morning and whether we're seeing broad-based strength in this economy or something that's showing us things are slowing down uh good morning Jonathan thank you very much this is a good jobs report it represents steady and stable growth which is what we want it shows that the president's policies by Dynamics is working it's combined with a 3.6 unemployment rate many predictions were that it would not get below four percent right after the pandemic induced economic crisis for a long time and these policies have defied that and in fact we've seen less than four percent unemployment for 17 consecutive months now which is the longest duration since the 1960s we know we've got a bit of tension out there in the labor market at the moment and you've been involved in some of that so I want to build on some of it with you we have a tentative agreement covering West Coast support workers that's been an issue for a while I know you've had some involvements so congratulations for that we now have a new issue so let's talk about that one the potential for 300 000 UPS workers to go on strike how involved are you in those discussions with the union and UPS yeah thank you John thanks for mentioning the the port because those parties worked very hard for over a year and did reach a tentative agreement recently it still has to be ratified so the process is not over but it demonstrates that collective bargaining works and that you can reach agreements that are as the president often says good for workers where companies can profit and it's good for the economy as a whole and there remain other negotiations that are going on right that's what it means to be in an economy where workers have some power where unions are at the table and we are monitoring the negotiations but trust that the parties are going to do what they need to do have you spoken to UPS have you spoken to the union involved this week yeah I've been in touch with both parties I've also just in my role as acting secretary talked to parties to these negotiations as well as unions and employers across the economy and so again I'm hopeful and know that that they're going to continue to uh to do what they need to do and that a fair contract is something that um that everybody you know hopes that there's there can be win-wins as we saw at the Port secondly so I've heard that word thrown around quite a lot by this Administration this word Fair and language is important it's meaningful what would Fair be right so this president has been very clear that fairness and Equity is very important and that we can build an economy that is fair and Equitable meaning from the bottom up in the middle out right where nobody gets left behind where we invest in the middle class you know biodynamics is all about investing in America and in particular Industries like semiconductors and Manufacturing and infrastructure but also investing in American workers and also increasing competition to decrease prices all those things are part of what President Biden believes is fair and what we believe this jobs report demonstrates that a strong and fair economy can be that's all great but we have to Define what it means for UPS specifically and this agreement they're going to try and strike with this Union what would a fair wage increase be can you put a number on it well I will say the same thing that I said when I was out the porch talking to the parties of contract is one that the members are going to ratify so a fair contract is something that that workers choose at the end of the day and again that process is important for the parties to be able to negotiate to be able to stay at the bargaining table and to be able to resolve issues and I do believe and as has been shown time and time again there are win-win Solutions there don't we have to be careful there though if we start saying things like fair is whatever the union wants right so I'm at the bargaining table right there's all kinds of issues that we have seen throughout history that when workers can bargain alongside employers who are committed to you know employers who understand that the best investment they can make is an investment in their workers there's all kinds of things that can happen when it comes to wages and working conditions and benefits and those are the kinds of things we want for every American worker right we want stable work we want a path to middle class we want security and retirement we want health benefits we want leave those are all things that the president has prioritized and I think those are all elements of what it means to have a good job there are issues you're working on secretary so I know that your nomination hasn't been progressing to take you from acting Secretary of Labor to Secretary of Labor what's going on with that can you give us some information on the timeline you're hoping that this gets down with so the president has expressed great confidence in me he's nominated me to serve as U.S labor secretary I am doing that job the confirmation question is certainly one for the Senate but I've also appreciated the broad support I've had from a number of Senators and we remain hopeful about confirmation and meanwhile I am here to do the job and do what the president asked which is help him finish the job and we're again seeing progress and continue growth and we know we have more work to do and I'm all in to help get that done are you concerned it's holding up the Department's agenda at all no so the work of the department continues Full Steam we are you know we have enforcement work to do to ensure that every worker gets the wages that they're that they're owed and comes home healthy and safe at the end of the day we are laser focused on connecting employers who need workers to um the good jobs uh that are being created in the economy to um to working people who are looking for those jobs so that's another big party for us and those are very important and and we will continue to to do them and I'm proud to lead the department in these efforts as secretary say we're happy to catch up with you this morning following the payroll support thanks for being with us Judy Sue there the acting U.S Secretary of Labor down in Washington D.C following the payrolls report from about an hour and 21 minutes ago with this final thought I'm pleased to say Victoria Fernandez Michael Collins still with us Victoria let's talk about this market and equities equities have absolutely ripped this year and In fairness to those that have been optimistic about the labor market including this Administration last year reviewed asked us where unemployment would be I'm not sure we'd say in around three and a half percent 12 months later and here we are at the start of the year if you ask where equities would be I'm not sure we'd say up 16 on the S P down to about 15 14 whatever it is now on the S P 500 the NASDAQ up by close to something like 40 year today Victoria what did we get so wrong and what has gone so right yeah it's it's an interesting observation Jonathan because I am one of those people as you know that was not as optimistic on this market and we really thought that we would see a recession somewhere around the middle of the year now we look at that closer towards the end of the year still thinking that there's these elements out there um that should cause us to have a little bit of caution whether it's money growth whether it's inverted yield curve you know the rate hikes that we've seen from central banks around the globe all of these things but we've had some elements come in to really support this economy when we had the bank issues in March we had the FED step in and put a tremendous amount of liquidity into the market we saw the TGA I'm spending in the first half of the year that was a tremendous boost to the economy as well with the liquidity component we've had a consumer that I think has stayed stronger than what people anticipated another Force for the economy to continue to do well and I think you've had rates up until this last week Ray for most of this year have stayed somewhat contained that again or yields I should say not rates but yields on treasuries contained that's given a boost to the economy as well I think what we've seen over the last week with yields moving higher I mean that 390 to 4 percent range we thought we'd be stuck in for a while yes right through that this week and we saw the market pull back you look at guilt guilt yields are back up to where they were back at the end of last year and you've seen that Equity Market pull back about 10 percent same thing with Boons so I think we need to look at some of the issues that are occurring that could pull the market back but up until now there has been quite a bit of support for the economy that I think most people thought would be on the downside by this point and Mike I want to give you the final word I've got about 30 seconds left to find a word is yours sir yeah similar thoughts uh Jonathan I think if the markets start pricing in more of a permanence to this higher level of rates i.e4 handle you know intermediate term 10-year treasury yields I think that has to put pressure on valuations of all assets right last time rates were this High Equity multiples were lower it's really tough to justify I think Equity multiples uh real estate valuations valuations on other types of debt if rate stances levels Mike Collins Victoria to the two of you thank you you're treading diary up next [Music] here's the training diary the NATO Summit kicking off on Tuesday CPI data Wednesday jobless claims Thursday then on Friday Bank earnings begin JP Morgan Wells Fargo City all coming up from New York that is for me enjoy the weekend thank you for choosing Bloomberg TV this was the countdown to be open this is Bloomberg foreign

Channel: Bloomberg Television

Views: 9,520

Keywords: Jon Ferro

Id: 9FrYxK1aJ84

Length: 44min 53sec (2693 seconds)

Published: Fri Jul 07 2023