May Jobs Report | Bloomberg Surveillance 06/02/23

>> THE ECONOMY REALLY HASN'T SLOWED MUCH AT ALL. >> WE HAVE THE Q1 EARNINGS RESULTS AND AMERICA'S DOING ALL RIGHT. >> THIS IS A RECESSION POSTPONED, NOT CANCELED. >> EVEN IF WE HAVE A MILD RECESSION, I WOULD STILL SAY THAT'S A SOFT LANDING SCENARIO. >> YOU HAVE TO BE CAUTIOUS AND I THINK WE'VE LEARNED YOU HAVE TO BE TACTICAL IN THIS MARKET. >> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO AND LISA ABRAMOWICZ. JONATHAN: IT IS PAYROLLS FRIDAY, LIVE FROM NEW YORK CITY THIS MORNING. GOOD MORNING, GOOD MORNING, THIS IS BLOOMBERG SURVEILLANCE. YOUR EQUITY MARKET IS POSITIVE BY 0.5%. YOUR EXPECTATION FOR PAYROLLS IS 195,000. IT'S BEEN YOUR STORY OF THE WEEK, CHINA. CHINA IS WORKING ON A NEW BASKET OF MEASURES TO SUPPORT THE PROPERTY MARKET. THAT'S WHERE THE PUSH WILL BE POTENTIALLY. TOM: BLOOMBERG IS REPORTING IS FROM ACROSS OUR OFFICES IN CHINA. THEY ALREADY HAVE A PLAN ON PROPERTY THAT'S WERE YOU GO IF YOU'RE WORRIED ABOUT INVESTMENT IN CHINA BUT IT DOESN'T SAY MUCH ABOUT JOB FORMATION. IT MOVES THE RENMINBI RIGHT AWAY WITH IT BEING STRONGER AT 7.06. I'M GOING TO GET ERIC SUNDAY EVENING AND THERE MONDAY MORNING, THAT'S WHEN NEWS BREAKS. JONATHAN: THE CHINESE EQUITY MARKET HAD A BETTER TIME OF IT. CHINA IS SPUTTERING AND EUROPE IS STRUGGLING BUT THE EXPECTATIONS COMING INTO THE YEAR WERE BETTER AND U.S. RESILIENCE WITH DATA SO FAR THIS WEEK WITH CLAIMS EXCEPTIONALLY LOW IN EMPLOYMENT AND VACANCIES ARE HIGHER IN HOUSING. TOM: THERE IS THIS NEW IDEA THAT ALL OF MATE WAS ABOUT AMERICAN EXCEPTIONALISM. OUR FIRST GUEST TODAY WILL TALK ABOUT WHAT REALLY HAPPENS IN RECESSION. ARE WE GOING TO DIE AT ONCE? NO, YOU ROLLED THROUGH A RECESSION AND MAYBE THAT'S WHAT WE ARE DOING IN PARTS OF AMERICA. JONATHAN: WITHOUT IT DOUBT. I THINK IT'S SO IMPORTANT, DOLLAR GENERAL, MACY'S AND OTHERS OUT THERE AS WELL. IT'S BEEN A WEEK OF CONTRADICTIONS BECAUSE YOU COMPARE THE FACT THAT WE'VE GOT SOME RESILIENT, ROBUST LABOR MARKET DATA WITH SOME MANUFACTURING DATA WHICH WAS TERRIBLE. TOM: BRAMO IS HERE ON A FRIDAY? IT'S JOBS DAY. LISA: [LAUGHTER] WHEN WE TAKE A LOOK THE MANUFACTURING RECESSION AND THE RESILIENCE OF CONSUMER SPENDING, HOW MUCH IS THE U.S. DIFFERENT BECAUSE OF TECH BUT BECAUSE OF STIMULUS AND HELICOPTER MONEY THAT HAS NOT WORKED ITS WAY THROUGH THE SYSTEM. AT ONE POINT WILL THE DIFFERENT WINDS -- WHIMS OF THE POST-PANDEMIC REALITY, WHEN DOES THAT EXPIRE? TOM: IT'S A CELEBRATION IN WASHINGTON. WITH THE SENATE VOTE AND ALL THAT, WE ARE MAYBE LESS AUSTERE THAN THEY ARE. YOU'VE LIVED THIS FOR YOUR ENTIRE LIFE IN LONDON, THE IDEA IN THE U.K. OF AUSTERITY AND MAYBE THERE IS A DIFFERENT FRENCH OR CHINA AUSTERITY. THE U.S. SAYS LET'S DO THE BIDEN STIMULUS. JONATHAN: WE'VE BEEN SURPRISED BY THE RESILIENT STORY IN THE UNITED STATES. LET'S GET TO THE PRICE ACTION. S&P 500 UP BY ALMOST 0.5% AND THAT EURO IS UP SLIGHTLY AS WELL. WHEN YOU HEAR A SENTENCE THAT SAYS CHINA STIMULUS, YOU LOOK TOWARD COMMODITIES. 71 ON WTI. LISA: WE WILL TALK ABOUT THE STIMULUS THROUGHOUT THE DAY. BUT THE KEY DATA POINT IS 8:30 A.M., THE MATE JOBS REPORT AND THERE HAVE BEEN 13 STRAIGHT MONTHS OF UPSIDE SURPRISES. THAT'S AHEAD OF A REPORT THAT'S EXPECTED TO BE SOFTER YET THE UNEMPLOYMENT RATE IS TAKING UP SLIGHTLY. IT'S NOT GOING TO NECESSARILY CHANGE THE DIAL ALL THAT MUCH. IT WILL BE INTERESTING TO SEE. JP MORGAN CE -- COO DANIEL PINTO AND CITIBANK'S JANE FRAZIER WILL TALK ABOUT TRADING BEING DOWN ABOUT 20% WITH MORE JOB CUTS IN TALKING ABOUT A DIFFICULT SCENARIO. TOM: I'M GLAD YOU BROUGHT THIS UP. THERE WAS A CHANGE IN TONE THIS WEEK. THERE IS JUST A SHIFT IN TOWN. LISA: SOME OF THEIR CLIENTS ARE MUCH MORE PESSIMISTIC THAN THEY HAD BEEN PREVIOUSLY. THE OPEC-PLUS MEETING BEGINS THIS WEEK ON SATURDAY AND CONTINUES INTO SUNDAY AND I'M CURIOUS TO SEE WHAT KIND OF RELATIONSHIP THERE IS BETWEEN THE UNITED ARAB EMIRATES AND SAUDI ARABIA AND HOW THEY HAVE MORE CUTS WHEN PEOPLE ARE LOOKING TO THEM. JONATHAN: IF THE PRESS IS NOT THERE, DID IT HAPPEN? LISA: MY UNDERSTANDING IS BLOOMBERG REPORTERS WILL BE IN VIENNA BUT NOT IN THE ROOM. HOW DO YOU COVER SOMETHING WHERE THEY AGGRESSIVELY DO NOT WANT YOU TO COVER IT? JONATHAN: YOU SPEAK TO PEOPLE TO ATTEND THAT CONFERENCE, IT IS THE LEAKY IS THING EVER. LISA: THE PURPOSE IS TO MESSAGE SOMETHING. IT'S A JAWBONE PRICES INTO A CERTAIN DIRECTION AND GIVE AN APPEARANCE OF UNITY SO IT'S ALL ABOUT THE MESSAGE. IT WILL BE LEAKY WITH PEOPLE LOBBYING FOR THEIR MESSAGE. TOM: THE CARTEL IS NOTHING BUT JAWBONING BY DEFINITION. THAT'S WHAT A CARTEL IS, IT'S A VERBAL STATEMENT THAT DOESN'T HAVE ANY REALITY IN ECONOMICS. JONATHAN: SOME PEOPLE JUST WANT TO BE HEARD. IT'S NOT JUST ABOUT MANAGING PRICES, IT'S ABOUT EGO. SOME PEOPLE ARE LIKE THAT. SOME PEOPLE LIKE TO TALK TO JOURNALISTS. THEY LIKE AN AUDIENCE. LISA: FEEL FREE TO GIVE A CALL IF ANYBODY WANTS TO TALK. JONATHAN: STEVE, FROM CITIBANK, LET'S START WITH FED POLICY, WE GET PAYROLLS LATER. IF WE DEEMPHASIZE THE IMPORTANCE OF PAYROLLS GIVEN THE GUIDANCE FROM FED OFFICIALS EARLY THIS WEEK -- >> PERHAPS NOT, THERE HAS BEEN SO MUCH OTHER NEWS TO CONSIDER. THE FED HAVE DONE AN AVERAGE OF 50 BASIS POINTS FOR 10 CONSECUTIVE MEETINGS. BY THE TIME INFLATION IS DOWN TO WHERE THEY WANTED, IT COULD BE ANOTHER 10 MEETINGS BUT THEY CANNOT ONE TIGHTENING 50 BASIS POINTS EVERY SINGLE MEETING WITHOUT GETTING A POLICY THAT WOULD ULTIMATELY CRASH THE ECONOMY WE WERE HAVING ALL OF THIS DEBT CEILING UNCERTAINTY AND WE COULDN'T BE CERTAIN WHAT THE MARKET EFFECT WOULD BE AND WHAT THE EFFECT IN WASHINGTON WOULD BE TO MAYBE SKIP A MEETING. NOW WE RUN TO THE PAYROLLS DATA AND IT CAN GET DIFFICULT IF IT'S A BIG SURPRISE ONE WAY OR ANOTHER. TOM: I LOVE IN YOUR RESEARCH NOTE YOU TALK ABOUT A ROLLING RECESSION. AS A GENERAL STATEMENT, ARE WE GOING TO HAVE A ROLLING RECESSION THAT WILL ACTUALLY AFFECT THE GLORY SECTORS LIKE TECHNOLOGY? CAN WE HAVE RECESSION THAT ROSE TO NVIDIA? >> IT'S DIFFERENT EVERY TIME. IF THIS WAS THE YEAR 2000, THE ANSWER WOULD BE YES. I WOULD PROBABLY SAY NO IN THIS CASE. I THINK YOU ARE GOING TO SEE THE GROWTH IN AI HAS BEEN REALLY CONSTRAINED IN BUILDING THE INFRASTRUCTURE OF AI WHETHER IT'S GONE TOO FAR IN A PARTICULAR STOCK OR NOT IS ONE THING. TO BROADEN ITS IMPACT IN COMING YEARS, IT'S NOT AT THE HEART OF WAS GOING ON IN OTHER SECTORS. THE ISM DATA SHOWS MANUFACTURING AROUND THE WORLD IS CONTRACTING. IT'S IN RECESSION AND SOME INDUSTRIES DIDN'T QUITE HAVE THE DOWNTURN OR THE UPTURNED LIKE AUTOMOBILES. MULTIFAMILY APARTMENT SECTOR IS SOMETHING I THINK EVERYBODY SHOULD BE LOOKING AT, SAYING THERE RECESSION HAS NOT HAPPENED YET BUT IT'S COMING. IT WILL BE LIKE SINGLE-FAMILY HOUSING WHICH IS ALREADY HAVING IN SOME RESPECTS A BOTTOMING IN SALES. IT'S ALLOWING US STRENGTH IN SERVICES FROM THE RESIDUAL OF COVID BUT IT'S ALLOWING US TO WORK ON INVENTORY SO THE ROLLING RECESSIONS ARE HAVING THE INTENDED EFFECT. IT'S HOLDING THE AMERICAN ECONOMY GROWTH RATE DOWN. THAT'S WHAT WE ARE SEEING AROUND THE WORLD. LISA: DID YOU SEE ANYTHING DURING THE FIRST SIX MONTHS OF THIS YEAR THAT CHANGED YOUR ALLOCATION HEADING INTO THE SECOND HALF? >> TO BE QUITE CONTRARY IN SOME RESPECTS, DEFENSIVE INVESTMENTS -- YOU CAN DO THIS IN ANY ASSET CLASS -- WE WERE OVERWEIGHT PHARMACEUTICALS. GLOBAL EQUITIES WERE DOWN ABOUT 20% AND WE STILL LOVE THE INDUSTRY AND WE DON'T THINK IT'S OVERVALUED BUT WE GOT AS MUCH DEFENSE AS WE COULD OUT OF IT. WE RE-ALLOCATED TO DEFENSIVE INVESTMENTS AROUND THE WORLD. YOU CAN LOOK AT BRAZILIAN EQUITIES, SEVEN TIMES EARNINGS, 7% DIVIDEND YIELD, 9% REAL INTEREST RATES AND INFLATION IS COMING DOWN SO THE CURRENCY IS VERY WEAK. YOU CAN SEE HOW CHINA MAY NOT BE THE ONLY SOURCE TO BROADEN THIS OUT. WE ALLOCATED 4% MORE TO NON-US EQUITIES. IT'S MORE TO DO HERE WITH THE DISLOCATIONS OF A RECESSION IN SOME PARTS OF OUR EQUITY MARKETS. WE ARE NOT EXACTLY BULLISH, WE ARE UNDERWEIGHT EQUITIES BUT A LOT OF THINGS THAT OCCUR IN RECESSIONS TO CLEAR THE DECK ARE IN FACT HAPPENING. JONATHAN: THANK YOU, SIR. IF YOU TAKE A LOOK AT THE ISM MANUFACTURING THE CAME OUT YESTERDAY, BELOW 50, YOU GOT A BELIED -- A DIVIDING LINE. WE'VE BEEN BELOW 50 FOR SEVEN CONSECUTIVE MONTHS. THAT'S THE LONGEST STREAK GOING BACK TO 2009. IT'S PRETTY TERRIBLE THE READ ON MANUFACTURING. TOM: THIS IS IMPORTANT AND THERE IS A BIFURCATION IN CHINA AND THE U.S. AND MAYBE IN EUROPE BETWEEN MANUFACTURING AND A CONSUMER SERVICE SECTOR ALMOST FINANCIAL RESTAURANT BOOM THAT'S IN THERE. I THINK WE'VE GOT TO REEF FRAME IT WITH THE JOBS REPORT. THE VIX, 15.45 OFF THE ENTHUSIASM IN WASHINGTON. THIS IS BEFORE I GOT IN. ROUND UP THE STANDARD & POOR'S 500 TO 4300. I THINK ANY OPTIMIST WOULD ROUND IT UP. JONATHAN: WE ARE LOOKING AT A CONTRARIAN TRADE RIGHT NOW. BY THE HANG SENG AND SALE I -- AND SELL AI. WE WILL PICK UP ON THAT NOTE A LITTLE BIT LATER. EQUITIES UP 0.5%. FROM NEW YORK ON THIS PAYROLLS FRIDAY, ABOUT TWO HOURS AND 18 MINUTES AWAY. LISA: KEEPING YOU UP-TO-DATE WITH NEWS FROM AROUND THE WORLD -- GLOBAL FOOD COST FELL IN MAY, DROPPING TO THE LOWEST LEVEL IN TWO YEARS AND PROVIDING HOPE THAT INFLATION ON SUPERMARKET SHELVES WILL START TO EASE. UNITED NATIONS INDEX OF FOOD COMMODITY PRICES FELL 2.6 IN MAY AS DECLINES IN GRAINS, VEGETABLE OIL AND DAIRY OFFSET GAINS IN SUGAR AND MEET. THE GAUGE OF PRICES FOR INTERNATIONALLY TRADED AGRICULTURE COMMODITIES HAS FALLEN 22% FROM ITS PEAK LAST YEAR FOLLOWING THE RUSSIAN INVASION OF UKRAINE. IN SINGAPORE, LLOYD AUSTIN AND HIS CHINESE COUNTERPART ARE AMONG MORE THAN 600 MILITARY LEADERS, POLICYMAKERS AND ANALYST FROM 40 NATIONS TAKING PART IN THE ANNUAL SHANGRI-LA DIALOGUE. U.S. IS BEIJING IS RULED OUT A MEETING BETWEEN THE TWO MILITARY CHIEFS BUT CHINA HAS NOT REMOVED SANCTIONS. THE PENTAGON IS SET TO BUY STARLING SATELLITE COMMUNICATIONS TERMINALS AND SERVICES FROM SPACEX. THEY WERE USED -- THEY WANT TO USE THEM FOR THE UKRAINIAN MILITARY. THEY SEE THEM AS VITAL FOR THE COUNTRY'S DEFENSE. RISHI SUNAK SAID THAT ASSERTION IS REFUSED A DEMAND FOR THE COVID-19 AND GREAT TO HAND OVER FORMER PRIME MINISTER BORIS JOHNSON MESSAGES. THEY SAID ITS FILING FOR A JUDICIAL REVIEW AS A REQUEST FOR THE DOCUMENT AND SETS UP A LEGAL BATTLE THAT WILL AMPLIFY ACCUSATIONS OF A COVER-UP. GLOBAL NEWS POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES, THIS IS BLOOMBERG. ♪ >> IT'S DEMANDING A BIPARTISAN SOLUTION WE KNEW WE NEED TO COME TOGETHER FOR A SOLUTION LIKE WHAT PASS TONIGHT SO I'M HAPPY TO STAND YOUR PASSING THIS CRITICAL LEGISLATION TO SUPPORT OUR FAMILIES, PRESERVE VITAL PROGRAMS AND AVOID CATASTROPHIC DEFAULT. JONATHAN: 63-36, CHUCK SCHUMER HIM OF THE DEBT CEILING BILL PASSING THE SENATE WITH EASE. IT'S ONTO THE PRESIDENT'S DESK AND THIS IS WHAT THE PRESIDENT SAYS. NO ONE GETS EVERYTHING THEY WANT BUT MAKE NO MISTAKE, THIS BIPARTISAN AGREEMENT IS A BIG WIN FOR THE ECONOMY AND THE AMERICAN PEOPLE. I BELIEVE WE WILL HEAR FROM HIM LATER ON THIS EVENING WHEN HE ADDRESSES THE NATION. TOM: IT WILL BE INTERESTING AND HE HAD A FALL AT THE AIR FORCE ACADEMY. HE MADE A JOKE ABOUT IT. HE GOT SANDBAGGED. HE WAS SITTING THERE AND I THINK I SAW FRANCINE FALL OVER ONCE. IT'S THE SAME THING, THESE LITTLE SANDBAGS ARE ON THE FLOOR AND THEY CAN BITE YOU. JONATHAN: IT'S NOT THE SAME THING BECAUSE THIS INDIVIDUAL'S 80 YEARS OLD AND WHEN WE SEE ANYTHING LIKE THIS, PEOPLE WILL BE SAYING THE SAME THING. TOM: I WAS THE SAME WAY. YOU ARE WAKING UP TO CRISIS OVER? IS THIS THE FIRST MORNING? JONATHAN: UNLESS THE PRESIDENT SURPRISES US AND SAYS I'M NOT SIGNING IT. TOM: LET'S RECALIBRATE AND MOVE FORWARD. DANIEL CLIFTON IS THE HEAD OF POLICY WORK AT STRATEGIS. HE HAS TERSE FACTS ABOUT WHAT IS GOING ON IN THE FACT THAT HE'S THE GUY FROM BAKERSFIELD. HE IS A FIREFIGHTER AND WORKED HIS WAY THROUGH ONE OF THE CAL STATE SYSTEMS AND KEVIN MCCARTHY HAS BEEN UNDERESTIMATED BY EVERYBODY FROM DAY ONE. YOU WRITE THIS MORNING ON THE UNDERESTIMATION OF THE SPEAKER. HOW BIG A VICTORY IS IT FOR KEVIN MCCARTHY? >> IT'S BIG BUT IT'S NOT THE BIGGEST. HE HAS PROBLEMS IN HIS CAUCUS BUT THIS IS BIG. HE EARNED HIS SPEAKERSHIP OVER THE LAST THREE MONTHS. THE PRESIDENT SAID I WILL NOT NEGOTIATE ON THE DEBT CEILING AND I BELIEVE THE PRESIDENT WAS VERY CLEAR ABOUT THAT BASED ON HIS OWN EXPERIENCES FROM 2011 WHEN HE WAS VICE PRESIDENT. THE SPEAKER UNIFIED HIS CAUCUS, PASSED THE BILL OUT OF THE HOUSE OF REPRESENTATIVES, FORCED A NEGOTIATION TO GET A $1 TRILLION SPENDING CUTS. THEY DID NOT GET EVERYTHING THEY WANTED WHICH IS EVIDENT BY THE VOTE TOTALS. MORE DEMOCRATS VOTED FOR THE DEBT CEILING BILL IN THE HOUSE AND SENATE THAN REPUBLICANS DID. THIS COULD HAVE GOTTEN FAR WORSE. THE BRINKSMANSHIP COULD HAVE BEEN FAR WORSE. IF MCCARTHY WAS NOT ABLE TO UNIFY HIS CAUCUS THE WAY HE DID AND HE DELIVERED TWO THIRDS OF REPUBLICANS IN SUPPORT OF RAISING THE DEBT CEILING. IT'S A BIG, BIG WIN AND HE SHOWED HE COULD DO THIS BETTER THAN PREVIOUS SPEAKERS. TOM: STAGGER FORWARD TO NOVEMBER , 2024, HAS THE MIDDLE CHANGED? THERE WILL BE POLARITY PRIMARY ON BOTH SIDES BUT BUT DID THE RESPECT FOR THE MIDDLE CHANGED WITHIN OUR POLITICAL CLASS? >> I THINK WE ALWAYS HAVE A MIDDLE, IT'S JUST THE EXTREMES TEND TO AMPLIFY THAT. WE HAVE HAD NINE FEDERAL ELECTION SINCE THE FINANCIAL CRISIS. THE VOTERS OF THIS COUNTRY REMOVE THE PARTY OF POWER IN EACH OF THOSE NINE REALLY -- ELECTIONS. THAT SOMEONE MOVING BACK AND FORTH. I THINK THE MIDDLE DOES HOLD BUT IT'S REALLY UGLY PROCESS. IS THE PROCESS OF GETTING LEGISLATION PASSED BUT IT GOT DONE ON A BIPARTISAN BASIS AND HOW WE SELECT OUR PRESIDENTS MOVING FORWARD. I THINK THIS WILL BE THE WILDEST ELECTION OF OUR LIFETIME. IT WILL MAKE 2016 AND 20 AT -- IN 2008 WHICH WERE AMAZING ELECTIONS BE VERY DIFFERENT THIS TIME. WE HAVE A LOT OF CHALLENGES BEFORE WE GET THERE. WE WILL HAVE TO SETTLE OUT AND DO THE DEFENSE SPENDING BUDGET EVEN THOUGH WE HAVE A TOPLINE SPENDING NUMBER. WE WILL HAVE TO RESPOND TO CHINA AND BUDGET LIMITS AND THE TREASURY WILL BE VERY CONSTRAINED AND HOW THEY ARE RAISING THE DEBT WITH THE RISING DEBT SERVICE COSTS IN THE FIRST 35 YEARS. IT'S EASY TO PULL FORWARD AND SAY WE GOT THIS CRISIS OUT-OF-THE-WAY BUT WE WILL HAVE SOME SERIOUS DOMESTIC AND INTERNATIONAL CHALLENGES BEFORE WE GET THERE AND GOVERNING WILL BE NEEDED. THE BIGGEST IMPLICATION FROM THIS DEAL IS NOT NOW THERE IS A SMIDGEN OF TRUST BETWEEN KEVIN MCCARTHY AND JOE BIDEN, SOMETHING THAT DID NOT EXIST AS LATE AS THREE WEEKS AGO. LISA: WHAT ABOUT THE TAX CONSTRAINT AND HOW MUCH REVENUE THEY CAN RAISE? THE FISCAL DRAG STARTS TO TAKE HOLD. MAYBE WE CAN STOP TALKING ABOUT THE DEBT CEILING DEBATE BUT YOU POINT OUT THAT ONCE DEBT SERVICING COSTS EXCEED 14% OF GDP, YOU END UP WITH THIS REAL PRESSURE. CAN YOU TALK ABOUT WHAT THAT MEANS ECONOMICALLY? >> ANYBODY WHO'S BEEN IN MARKETS FOR 30 YEARS, DEFICITS DON'T REALLY MATTER. THIS IS THE FIRST TIME AIR DEBT SERVICING COST IS RISING IN 35 YEARS. WE MEASURE THAT BY NET INTEREST PAUSES AS A PERCENTAGE OF TAX REVENUE. INTEREST COSTS ARE SURGING AND TAX REVENUES ARE DECLINING. WHAT THE DEBT CEILING REPRESENTED WAS THE FIRST COURSE IN A LARGER PERIOD OF AUSTERITY. WE WENT BACK 80 YEARS AND WE LOOKED AT WHETHER THE U.S. WAS IN A PERIOD OF AUSTERITY AND STIMULUS IN THE DEFINING FACTORS . ONCE YOU HIT OVER 14%, THE BOND MARKET STARTS TO PUT PRESSURE ON POLICYMAKERS AND IT FORCES AUSTERITY. WE RAISED TAXES SIX YEARS IN A ROW IN THE EARLY 80'S UNDER RONALD REAGAN WHILE WE HAD THE 14% INTEREST COST AND IT WAS HIGHER. WE WILL HIT IT NEXT COUPLE OF MONTHS THAT'S WHY YOU ARE SEEING TREASURIES SO CONSTRAINT ON ITS ABILITY TO RAISE DEBT. THE DEBT CEILING ADD LITTLE PREMIUM BUT 6% FOR THREE DAY CASH MANAGEMENT BILL? THAT'S A BIG PROBLEM. I THINK THAT WILL BE THE BIGGER ISSUE SO TREASURY HAS TO RELOAD THE TREASURY GENERAL ACCOUNT AND TRY TO DO IT AND THAT WILL BE HARD TO DO. THE REVERSE REPO RATE IS PRETTY HIGH AND THERE IS NO DURATION RISK AND IF THEY CAN'T GET IT OUT, IT WILL COME OUT OF THE BANK RESERVES. THAT MEANS THERE WILL BE LESS LIQUIDITY. WE BEEN ARGUING THROUGHOUT THE DEBATE THAT STOCKS CAN RALLY INTO THE DEBT DEBATE BECAUSE THERE WILL BE MASSIVE LIQUIDITY PUMPED INTO THE SYSTEM. ONCE THE DEBT CEILING GETS RAISED, THAT LIQUIDITY MAY COME OUT AND THAT POSES RISKS FOR FINANCIAL MARKETS AND THE SECOND HALF OF THE YEAR. JONATHAN: PEOPLE ARE FOCUSED ON THE POTENTIAL FOR THAT. LET'S FOCUS ON THE GENERAL ELECTION NEXT YEAR. CAN YOU THINK OF A TIME WHEN SUCH A LARGE CHUNK OF THE MIDDLE OF THIS COUNTRY IS FACING THE PROSPECT OF TWO CANDIDATES FACING EACH OTHER AGAIN BUT THEY DON'T WANT THEM TO RUN? >> I SPENT 11 WEEKS ON THE ROAD IN THE LAST ELECTION AND EVERY TIME I TAKE TRUMP VERSUS BIDEN, PEOPLE GIVE ME A FUNNY LOOK IT DIDN'T REALLY MATTER. THEIR SUPPORT MAY BE SOFTER THAN WHAT YOU WOULD SEE IN THE POLLS. WE WILL HAVE A VERY SPIRITED DEBATE IN THE REPUBLICAN PRIMARY. KEEP AN EYE ON GLENN YOUNGKIN FROM VIRGINIA. RON DESANTIS WON A LANDSLIDE IN FLORIDA SO AS HE GETS USED TO THE RHYTHM A CAMPAIGN, I THINK HE WILL BE FORMIDABLE AND KEEP AN EYE ON TIM SCOTT. I WOULD KEEP AN I ON RFK ON THE DEMOCRATIC SIDE BEING EIGHT PAT BUCHANAN TYPE CANDIDATE. JOE BIDEN WANTS TO BE THE NOMINEE AND HE WILL BE THE NOMINEE. PAT BUCHANAN DENTED GEORGE WALKER BUSH THAT LED TO BILL CLINTON'S VICTORY IN THE COULD BE CONCERNED ABOUT THAT AS WE GO DEEPER INTO THE RATE SO I THINK WE WILL HAVE A SPIRITED DEBATE. THE PROCESS IS NOT PRETTY BUT I THINK THE OUTCOME WILL PRODUCE SOMETHING THAT MAY BE DIFFERENT THAN THE CONSENSUS. JONATHAN: INTERESTING, THANK YOU FOR THAT. WE CAN HEAR MORE AND MORE ABOUT THAT. IS THIS THE BEST THIS COUNTRY CAN DO? THAT QUESTION IS ASKED A LOT. IT REMINDS ME OF 2019 IN THE U.K.. SAME THING. SAME CONVERSATION, IS THIS THE BEST THIS COUNTRY CAN DO? TOM: THERE IS AN ECLECTIC GROUP. JONATHAN: FUTURES ARE POSITIVE AND TALK OF CHINA STIMULUS, WE WILL PICK UP ON THAT CONVERSATION NEXT. JONATHAN: PAYROLLS ARE JUST AROUND THE CORNER AND EQUITIES ARE HIGHER. WE HAVE SOME DATA JUST AHEAD OF IT. EQUITIES UP BY 0.5 PERCENT ON THE S&P 500 AND THE NASDAQ UP THE SAME AS WELL AND A LIFT IN THE EQUITY MARKET. IN THE BOND MARKET, THE YIELDS LOOK LIKE THIS, JUST A BIT HIGHER. ONLY ONE THING IN THE FX MARKET AND THAT'S CHINA. THE BREAK DOWN THERE SO THAT'S A STRONGER CHINESE CURRENCY OFF OF THE BACK OF SPECULATION THAT WE COULD GET SOME STIMULUS AROUND THE PROPERTY MARKET. TOM: BLOOMBERG REPORTS WE WILL SEE PROPERTY MARKET STIMULUS WHICH GOES TO THE HEART OF THE MIDDLE CLASS THERE. THE GENERAL CHINA DOLLAR WEAKNESS, DID WE EXPECT THAT 24 HOURS AGO? I'M NOT SO SURE. WITH THE EQUITY MARKET LIFT, I WONDER IF WE GET A CERTAIN WAGE DYNAMIC AND NONFARM PAYROLL DYNAMIC. I'M NOT THERE YET. I'M NOT REJECTING IT -- I'M NOT PREDICTING IT. JONATHAN: IT'S BEEN PREDICTED OF 200,000 ON PAYROLLS. THE TIMING OF THAT IS NOW UNCERTAIN. ULTIMATELY, THERE IS A FEELING AFTER THE FED SPEAK THIS WEEK THAT THE FEDERAL RESERVE OFFICIALS HAVE DE-EMPHASIZED THE INFORMATION. I WONDER HOW BIG TODAY HAS TO BE TO REINTRODUCE THE IDEA THAT THEY COULD MAKE A MOVE THIS MONTH. TOM: THE INFLATION DATA WILL BE A BIG DEAL COMING UP. JONATHAN: JUNE 13 IS THE DATA BEFORE THE MEETING SO THEY GO INTO A QUIET TIME THIS WEEK. THE MEDIAN ESTIMATE IS 195,000 ON JOBS. IT'S NOT AS BIG AS IT WAS IN THE PANDEMIC YEARS. THESE ARE THE BIG ESTIMATES ON THE STREET NOW ON WALL STREET. JP MORGAN IS BOTTOM OF THE PACK. WELLS FARGO IS THE TOP OF THE PACK AND THEY'RE LOOKING FOR SOMETHING LIKE 200 AND 10 LATER. 3.4% UNEMPLOYMENT EVEN IF YOU THINK THAT GOES TO 3.5. THAT AIN'T BAD. TOM: EVEN THE JP MORGAN STATISTIC WOULD NOT BE BAD IN A NORMAL ECONOMY. THE SENIOR ECONOMIST AT WELLS FARGO JOINS US. THERE IS A THRUST THAT WE ARE CREATING JOBS BUT THEY ARE LOW-PAYING JOBS AND MANY OF THEM ARE TAKEN BY NEW IMMIGRANTS, DIFFERENT KINDS OF PEOPLE AND WHAT AMERICA EXPECTS. THE 200,000 NUMBER YOU SEE THIS MORNING, WHAT KIND OF JOBS ARE THOSE? >> ONE THING THAT'S IMPORTANT TO NOTE IS IN TERMS OF THE JOB CREATION WE HAVE SEEN RECENTLY AND WHAT WE EXPECT IN THE NEAR TERM IS THAT WE CONTINUE TO SEE OUTSIZED GAINS IN LEISURE AND HOSPITALITY THAT HAVE MORE SCOPE. THAT'S IMPORTANT GIVEN THAT THIS IS THE LOWEST PAYING MAJOR INDUSTRY WE SEE AND ON THE FLIPSIDE, WHERE WE SEE MORE OF THE SOFTNESS IN AREAS LIKE INFORMATION AND PROFESSIONAL BUSINESS SERVICES AND FINANCIAL SERVICES. WE ARE SEEING SOME ROTATION IN TERMS OF THE JOB QUALITY THE AMERICAN ECONOMY IS CREATING NOW. TOM: IN THIS JOBS REPORT, THERE IS AN OPTIMISM THAT WILL ENDURE IN THIS RECESSION AND THERE IS AN IDEA OF ROLLING RECESSION OR COMPLETE RECESSION. WHERE DO YOU FIT INTO THAT? >> WE THINK THE U.S. ECONOMY WILL ENTER INTO RECESSION AND IS PROBABLY USEFUL TO PUT SOME DEFINITIONS AROUND THAT. PEOPLE'S VIEWS OF A RECESSION HAVE GOTTEN MUDDLED. WE EXPECT A CONTRACTION NOT JUST IN GDP BUT CONSUMER SPENDING AS WELL AS JOB LOSSES. WE ARE LOOKING FOR THE CONTRACTION TO HAPPEN PROBABLY AROUND THE FOURTH QUARTER OF THIS YEAR, MAYBE SPILLING OVER INTO THE EARLY PART OF NEXT YEAR. WHEN WE STEP BACK AND TAKE INTO ACCOUNT THAT WE HAVE NOT SEEN THE FULL EFFECT OF FED TIGHTENING AND WE NEED TO SEE DEMAND COME DOWN TO GET INFLATION BACK TO 2% ON A SUSTAINED BASIS, WE TAKE A CONTRACTION AN OVERALL ACTIVITY. LISA: HOW HIGH IS THE BAR FOR THE FED TO HIKE RATES GIVEN THAT PEOPLE ARE EXPECTING A ROBUST LABOR MARKET? FED RHETORIC CHANGE THE EQUATION THIS WEEK. >> IN TERMS OF THE FED GOING AGAIN IN JUNE, THE BAR IS HIGHER THAN IT WAS AT THE START OF THE WEEK. IT'S NOT BECAUSE OF THE DATA. THE DATA IS STILL PRETTY STRONG THIS WEEK BUT IT'S AHEAD OF THE FED SPEAK IN THE FED IS SAYING WHAT WILL BE A MORE CAUTIOUS REACTION TO THAT DATA. IN TERMS OF TODAY'S NUMBERS CHANGING THAT EQUATION, I THINK YOU WOULD HAVE TO SEE AT LEAST 250,000 IN TERMS OF PAYROLLS OR MAYBE HIGHER TO GET THE THREE MONTH MOVING AVERAGE UP. IT WILL ALSO HAVE TO BE CORROBORATED BY MORE STRENGTH COMING OUT OF WAGE GROWTH THAN WHAT IS EXPECTED AS WELL AND STILL VERY LOW UNEMPLOYMENT SIGNALING THAT THE JOBS MARKET IS STILL INCREDIBLY TIGHT. LISA: HAVE WE ABANDONED DATA DEPENDENCY BECAUSE IT'S TOO COMPLICATED? >> I THINK WE HAVE TO SOME EXTENT. IN SOME WAYS, THE TIMING OF THIS FED PAUSE OR SKIP IS PRETTY INTERESTING WHEN YOU CONSIDER THE FACT THAT IF YOU LOOK AT THE BLOOMBERG ECONOMICS OF PRICE INDEX FOR THE U.S., IT IS AT AN 18 MONTH HIGH. WE HAVE ACTUALLY SEEN THE DATE TO IN MUCH STRONGER THAN WHAT WAS EXPECTED AND HERE WE ARE TALKING ABOUT A HOLD IN JUNE. WHILE THE FED SAYS THEY ARE STILL DATA DEPENDENT, IT'S NOT EVERY TICK OF THE DATA BUT IT SEEMS TO BE SOMEWHAT OF A STRANGE TIME TO BACK OFF THE DATA SIDE AND PERHAPS HOLD RATES IN JUNE. TOM: TAKE THE VECTOR OF WAGE GROWTH AND INFLATION AND TELL ME WHERE I WILL SEE AN ACTUAL INFLATION ADJUSTED REAL WAGE GROWTH. IS IT THIS YEAR OR NEXT YEAR? >> I THINK WE ARE PROBABLY GETTING CLOSE TO IT THIS YEAR AND A BIG PART OF THAT IS WHAT'S HAPPENING IN TERMS OF COMMODITIES. THE FACT THAT YOU ARE FINALLY SEEING SOME OUTRIGHT DEFLATION IN FOOD AND WE WILL SEE A BIG DRAGON ENERGY PRICES IN THE NEXT CPI REPORT. NEAR TERM, YOU COULD GET REAL WAGE GROWTH BUT IN TERMS OF HOW MUCH IT PERSISTS, I THINK THAT WILL BE A CLOSER CALL. WE WILL PROBABLY STILL LOOKING AT ONLY MODEST TO ROUGHLY FLAT REAL AVERAGE HOURLY EARNINGS GROWTH AS WE MOVE INTO NEXT YEAR. TOM: MICHAEL MCKEE SAID ASK SARA WHAT TO LOOK FOR BELOW THE HEADLINE DATA. WHAT WILL YOU BE LOOKING FOR AT 8:30 A.M.? >> WHAT WE NEED TO BE FOCUSED ON IS WHAT'S HAPPENING ON THE LABOR SUPPLY FRONT. WE'VE SEEN LABOR DEMAND TREND DOWN AND STILL PRETTY STRONG BUT IN TERMS OF THE OUTRIGHT PATH OF PAYROLL GROWTH AND HOMELY JOBS WE CONTINUE TO ADD, THAT DEPENDS HEAVILY ON WHAT'S HAPPENING ON THE SUPPLY FRONT. YOU HAD A PRETTY GOOD RUN IN TERMS OF LABOR FORCE GROWTH AND PARTICIPATION OVER THE LAST SIX MONTHS EITHER FLAT OR HIGHER SO WILL WE SEE THAT CONTINUE? IT SUGGESTS THE LABOR MARKET MIGHT HAVE MORE LEGS AND THAT COULD HELP THE BROADER ECONOMY GIVEN WHAT THAT MEANS IN TERMS OF CONSUMER SPENDING. LISA: BEFORE WE LET YOU GO, MANY PEOPLE ARE SEEING A SLOW DECELERATION OF THE ECONOMY AND YOU CAN ARGUE HOW QUICKLY THE FED RESPONSE WILL BE. A LOT OF IT IS BECOMING PREDICTABLE. WHAT TAIL RISKS DO YOU SEE PERCOLATING OUT THERE, THINGS THAT ARE KEEPING YOU UP AT NIGHT WEATHER IS THE MULTIFAMILY HOUSING OR COMMERCIAL REAL ESTATE? >> IN SOME WAYS, WE'RE STILL WORRIED ABOUT SOME OF THE BIG STRESSES THAT EVEN IF THE FED DOESN'T RAISE RATES FROM HERE IT'S A CONTINUING SQUEEZE. DO YOU GET A MORE DISCRETE EVENT WHICH INTRODUCE MORE RISK AND UNCERTAINTY AND GET -- OR GET AN ABRUPT SHIFT. THAT'S ONE THING WE ARE STILL THINKING ABOUT. JONATHAN: THANK YOU. LOOKING FOR MORE FED SPEAK IN A TOUCH MORE DATA AS WELL, 830 A.M., PAYROLLS ARE EXPECTED TO BE AROUND 200,000. THE FED HAS DONE A DECENT JOB OF COMMUNICATING THIS WEEK, DARE I SAY? GOVERNOR JEFFERSON IS LEADING THE PACK. TOM: THE SKIP/PAUSE THING WE STARTED THE WEEK ON THAT AND THAT'S, DOWN A LITTLE BIT. THE REASON IS BECAUSE WE ARE TO THE DATA. HOW MANY TIMES DO WE GUESS WHEN THE DATA COMES OUT AND WE GET IT WRONG? JONATHAN: MICHAEL MCKEE CAME OUT WITH A STAT, IT ISN'T SINCE LAST APRIL WHEN WE GOT THE MARCH PAYROLL REPORT ON THE DAY WHEN WE HAD A DOWNSIDE SURPRISE FOR PAYROLLS. THAT'S BEEN THE THEME. WHERE IS THE DATA COMING IN RELATIVE TO EXPECTATIONS? UPSIDE SURPRISE, UPSIDE SURPRISE, UPSIDE SURPRISE. LISA: IT'S MADE ME THINK ABOUT THE ECONOMICS PROFESSION AND HOW IT USUALLY LOOKS AT A LONGER SET OF DATA. IT DOESN'T WORK ON A MONTH-TO-MONTH BASIS AND A POST-PANDEMIC ECONOMY. BUT WE ARE HEARING IS PAUSE, STOP FOR A SECOND AND UNDERSTAND NOT ONLY WHERE WE ARE ECONOMICALLY BUT WHAT OUR POLICIES DOING. INVESTORS DON'T HAVE THE LUXURY OF PAUSING OR SKIPPING OR NOT DOING ANYTHING. HOW DO YOU ARRANGE WHEN YOU CANNOT GET THE EDGE AND WHETHER WE WILL GET A RECESSION AND HOW DEEP IT WILL BE? JONATHAN: WE WILL GET SOME HEALTHY DISSENT IN THE NEXT COUPLE OF WEEKS. YOU CAN FEEL THE COMMITTEE SPLINTERING. TOM: AUSTIN GOOLSBY. JONATHAN: HE WANTS TO MOVE. I THINK HE'S READY TO COMMIT TO THE END OF IT. PAUSE, WE ARE DONE. YOUR DISAGREEMENT FACES SO LOUD. LISA: NO, I WILL JUST SAY THAT I'M LISTENING TO WHAT YOU ARE SAYING BUT I THINK THERE COULD BE DISSENTS. I'M GUESSING THERE PROBABLY WON'T BE BECAUSE RIGHT NOW, I DON'T HEAR MANY PEOPLE SAY THERE IS A RISK OF RUNAWAY INFLATION. THE HYPERINFLATION ARGUMENTS HAVE FADED AWAY. WE ARE CLEARLY SEEING THE PEAK OF INFLATION. FROM THAT PERSPECTIVE, THE IDEA OF TAKING A BREAK IS PROBABLY GOING TO GAIN MORE TRACTION. JONATHAN: THERE WERE A COUPLE OF THINGS THAT GOT CONSENSUS YESTERDAY. ONE IS NO CUTS AND THE OTHER IS THAT WE CAN WAIT. THERE IS CONSENSUS THERE BUT THERE ARE OTHERS WHO THINK DIFFERENTLY AND THAT WILL BE EXACERBATED IN AN HOUR AND 50 MINUTES UNEMPLOYMENT NUMBERS. TOM: CAN I ASK YOU A QUESTION? JONATHAN: SURE. TOM: HIS CORN WHEAT IN THE UNITED KINGDOM? WHAT YOU CALL WHEAT? JONATHAN: WHY ARE WE TALKING ABOUT THIS? TOM: WHEAT IS DOWN 57% FROM A YEAR AGO AND IT'S ONLY DOWN 29% IN THE UNITED KINGDOM. JONATHAN: THIS SHOW IS SO RANDOM. I HAVE NO IDEA. TOM: WHAT ARE THOSE THINGS YOU HAVE? WHEAT A BICKS? JONATHAN: I THINK WE STATE WHEAT AND CORN. I AM NOT A FARMER. SARAH WOLF OF MORGAN STANLEY AT 7:30 A.M. I WAS THERE WITH YOU IN THE VICTORIAN ERA. THIS IS BLOOMBERG. LISA: WHAT JUST HAPPENED? KEEPING YOU UP TO DATE -- THE UKRAINE AIR DEFENSE SAYS CRUISE MISSILES AND DRONES WERE SHOT DOWN IN THE REGION TODAY IN THE UKRAINE CAPITAL HAS BEEN ATTACKED BY RUSSIA FROM THE AIR ON EACH OF THE PAST SIX NIGHTS. NO CASUALTIES WERE IMMEDIATELY REPORTED AFTER AT LEAST THREE PEOPLE INCLUDING A CHILD WERE KILLED IN THURSDAY'S BARRAGE. DRONE ATTACKS HAVE BEEN REPORTED ACROSS A WIDENING PORTION OF RUSSIA. TURKISH PRESIDENT EARLY AGAIN WILL TAP A NEW TREASURY AND FINANCE MINISTER. HE IS AN ADVOCATE OF CONVENTIONAL ECONOMICS. SUPPORTERS SAY HIS APPOINTMENT WILL LIKELY SHORE UP MARKET CONFIDENCE. HE IS SAID TO BE IN CHARGE OF ALL OF TURKEY'S ECONOMIC POLICIES IN THE NEW CABINET. ERDOGAN ONE REELECTION SUNDAY. JAMIE DIMON WILL VISIT TAIWAN AFTER WRAPPING UP HIS HIGH PROFILE CHIP TO CHINA -- TRIP TO CHINA. THIS COMES AT A TIME OF HEIGHTENED TENSIONS BETWEEN BEIJING AND WASHINGTON. BERNARD ARNAULT HAS BECOME THE LATEST FEI COMPANY BOSS TO ANNOUNCED PLANS TO VISIT CHINA AS THE TESLA CEO ELON MUSK RETURNS FROM HIS WHIRLWIND TOUR OF THE COUNTRY. GLOBAL NEWS POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES, THIS IS BLOOMBERG. >> UNITED STATES DOES NOT SEEK CONFLICT OR CONFRONTATION WITH CHINA. CHINA AND THE UNITED STATES SHOULD BE ABLE TO WORK TOGETHER WHERE WE CAN SOLVE SOME GLOBAL CHALLENGES LIKE CLIMATE. BUT WE ARE PREPARED FOR COMPETITION. WE WILL STAND UP OUR INTERESTS OF OUR FRIENDS WHO WE VALUE. JONATHAN: THE PRESIDENT OF THE UNITED STATES ON CHINA BEFORE TRIPPING. WE ARE TOLD THE PRESENT IS OK AND HE CHOKED AFTER GETTING OFF THE HELICOPTER AT THE WHITE HOUSE. JESSE JOKED -- HE CHOKED AFTER GETTING OFF THE HELICOPTER IN THE WHITE HOUSE. YOU CAN'T GET AWAY FROM THIS PROBLEM. YOU'VE GOT TO GET AWAY FROM SAYING HE IS JUST 80 YEARS OLD. PEOPLE THINK HE IS AN OLD 80 YEARS OLD AND THAT'S A CONCERN GOING INTO THE ELECTION NEXT YEAR. REPORTING FROM THE TEAM AT BLOOMBERG, CHINA'S WORKING ON A NEW BASKET OF MEASURES TO SUPPORT THE PROPERTY MARKET AKA STIMULUS. YOU CAN SEE THE STRENGTH OF THE CHINESE CURRENCY COMING THROUGH THIS MORNING AND THIS TOOK PLACE ABOUT TWO HOURS AGO. TOM: IF YOU STAND IN SHANGHAI OR BEIJING AND YOU LOOK AROUND, THERE ARE PROPERTIES AND MANY ARE RESIDENTIAL AND MANY ARE THE ONLY OUTLET FOR WEALTH CREATION OR SUPPOSE IT WILL CREATION IN CHINA. SOMEONE WITH FIRST-HAND EXPERIENCE ON THIS STORY IS TOM MACKENZIE WHO JOINS US FROM LONDON. JONATHAN: THIS IS HAVE TO START THE WEEKEND. TOM: THANK YOU ON A FRIDAY FOR JOINING US. YOU HAVE LIVED THIS IN REAL TIME. EXPLAIN PROPERTY IN CHINA. IS IT THE ONLY OUTLET FOR THE MIDDLE CLASS TO PROVIDE FOR A FUTURE? >> THE PENDULUM HAS SWUNG. WHEN I ARRIVED IN 2016 IN CHINA, THERE WERE BANNERS BEING PUT UP WITH HOUSES FOR LIVING IN, NOT FOR SPECULATING BECAUSE THE RUN-UP IN PROPERTY PRICES WAS RED-HOT. THEY WERE PUTTING IN PLACE RESTRICTIONS TO ENSURE YOU COULDN'T BUY MULTIPLE PROPERTIES WHICH HISTORICALLY SOMETHING PEOPLE HAVE DONE. THE MAJORITY OF HOUSEHOLD INCOME IS STORED IN PROPERTY. BECAUSE OF THE DIFFICULTY OF INVESTING IN EQUITY MARKETS, IT ACCOUNTS FOR ABOUT 20% OF CHINESE GDP. THE ANNOUNCEMENT TODAY AROUND ADDITIONAL MEASURES TO SUPPORT THE BELEAGUERED PROPERTY SECTOR SPEAK TO THE URGENCY SO THEY ARE ALLOWING PEOPLE TO BUY MORE PROPERTIES IN CERTAIN CITIES AND EASING SOME OF THE RESTRICTIONS AND MAKING IT LOW IN TERMS OF THE DOWN PAYMENT AND IT'S UP TO THE COMMISSIONER FEES THAT THESE AGENTS CHARGE. THEY ARE PUTTING A CAP ON THOSE. NOW HOUSE PRICES ARE GET DOWN AND CONTINUED TO BE LOWER. TOM: ARE THE DEVELOPERS -- ARE THEY PUTTING IN THIS LEGISLATION -- LOOK FOR ASIAN COVERAGE ON SUNDAY. ARE THEY DOING THIS FOR A TROUBLE DEVELOPER OR DOING THIS FOR A COUPLE TO THE WEST LOOKING AT PANDAS? >> WONDER AND EVERGRANDE ARE TWO DEVELOPERS THAT THEY FOCUSED ON. THERE IS POTENTIALLY DEBT DEFAULT OR DEBT RISK THAT'S APPROXIMATE TO ABOUT 12% OF CHINA'S GDP. PROPERTY DEBT THAT IS AT RISK OF DEFAULT. THOSE TWO DEVELOPERS ARE IN THE SPOTLIGHT. IF THEY CANNOT SHIFT PROPERTIES, THE PAYMENTS THEY ARE MAKING, THE INABILITY TO TAP THE MARKET THEY ARE PAYING ABOUT 20% WHEN THEY TAP THE MARKET, THAT BECOMES THAT MUCH MORE DIFFICULT. IF THEY ARE NOT BUYING LAND, THAN LOCAL GOVERNMENTS CANNOT FIND THE SUPPORT THEY NEED FOR THIS ECONOMY. LOCAL GOVERNMENTS IN CHINA DEPEND ON LAND SALES IN ORDER TO DRIVE THEIR REVENUES TO FUND THE INFRASTRUCTURE PROJECTS THAT BEIJING WANTS TO SEE. LISA: HOW MUCH IS THIS ABOUT SUPPORTING THE ECONOMY AND GROWTH? >> IT'S A FINE LINE. TOTAL DEBT, THE TOTAL CHINESE GOVERNMENT DEBT, THE SHADOW BANKS, IT'S ABOUT $23 TRILLION AND THAT'S THE ESTIMATE FROM GOLDMAN SACHS. $30 TRILLION IN THE U.S. AS AN EQUIVALENT SO THEY WERE TRYING TO ENGINEER THE SUPPORT FOR THE DEVELOPERS AND THEY WANT TO HELP IN TERMS OF REFINANCING AND ACCESS TO EDITING. THEY WANT TO BE ABLE TO SUPPORT HOUSEHOLDS AND CONSUMERS TO HAVE THE CONFIDENCE TO BUY THESE PROPERTIES BECAUSE THERE IS A LOOP BACK TO LOCAL GOVERNMENT. WHAT YOU REALLY NEED IS A RESTRUCTURING PLAN FOR THE DEBT FOR THESE DEVELOPERS AND SO FAR THAT HAS NOT BEEN FORTHCOMING. THEY ARE ALSO LOOKING AT PLUS 20% FOR CHINESE YOUTH WHICH IS REMARKABLE. THAT'S A RECORD NUMBER AND THAT'S THE OFFICIAL NUMBER. SOME SAY IT'S FAR LIKELY HIGHER THAN THAT AND THAT IS HOLDING BACK THE DEMAND FOR PROPERTY AS WELL. THEY ARE TRYING TO BREAK THE CYCLE. LISA: IS THIS THE END OF STIMULUS OR THE OPENING SALVO IN A SERIES OF STEPS THAT ARE EXPECTED FROM THE CHINESE COMMUNIST PARTY? >> EVEN THE FACT THAT WE SAW CHINESE STOCKS GETTING CLOSE TO A BEAR MARKET THIS WEEK, THEY SAY YOU CAN CUT THE BENCHMARK RATES AND GO THROUGH WITH MORE RESERVE CUTS FOR THE BANKING CENTER -- SECTOR. THEY HAVE DRY POWDER THERE BUT THIS IS NOT -- THIS IS NOTHING MORE THAN A HISTORIC CONCERN ABOUT GETTING BACK TO A PLACE WHERE THERE IS OVER EXUBERANCE IN TERMS OF LEVERAGE. THEY'VE DONE SOME WORK ON THAT FRONT BUT THEY DON'T WANT TO UNWIND ALL OF IT. TOM: WHAT ARE YOU LOOKING FOR SUNDAY EVENING NEW YORK TIME? WILL THEY START THE WEEK STRONG? >> OUT OF CHINA, THERE WAS AN UPTICK IN THE EQUITIES TODAY ON THE BACK OF CONFIDENCE THAT MAYBE YOU WOULD NOT GET THE RATE HIKE FROM THE FED AND THE VALUATIONS ARE LOOKING CHEAP IN TERMS OF CHINESE EQUITIES. WE WILL SEE IF THAT CAN BE MAINTAINED. THE YUAN IS SHOWING A BIT OF STRENGTH, AS YOU SAID. THEY WANT POLICY TO BE PUSHED THROUGH OVER THE WEEKEND. WILL THEY COME THROUGH WITH ADDITIONAL SUPPORTIVE MEASURES? PEOPLE ON THE GROUND ARE LOOKING FOR WHO HAVE EXPOSURE TO CHINESE STOCKS. THEY WANT TO SEE MORE SUPPORT. JONATHAN: WASN'T THERE A RATE CUT CHRISTMAS DAY A LONG TIME AGO? HOW MANY YEARS AGO WAS THAT? DECADES? >> ABOUT A DECADE AGO. JONATHAN: GIFTS FOR THE EQUITY MARKET. TOM: THAT'S WHAT YOU DO. THE IDEA IS YOU DO IT WHEN NOBODY IS LOOKING. WE SAW THAT LAST FRIDAY. SOMEBODY SNUCK SOMETHING OUT MEMORIAL DAY WEEKEND AND NOBODY WILL SEE IT. JONATHAN: YOU BEEN WAITING FOR THIS. WHEN IT COMES TO POLICY OUT OF CHINA, I'M NOT SURE THEY CARE ABOUT THE PMI BEING ABOVE 50. TOM: YOU ARE CORRECT. JONATHAN: WHAT IS THE LONG-TERM GOAL HERE? TOM: THE ANSWER IS SITTING IN BEIJING WITH A POUNDING HEADACHE BECAUSE OF THE POLLUTION IN A CONFERENCE WITH PNB BEAR ABOUT. I'M SITTING THERE WITH 500 PEOPLE IN THE ROOM AND YOU HAVE TO BE CAREFUL WITH WHAT YOU SAY. I'M THERE WITH THE TOP THINKERS FOR B&B PARABOLIC WITH THEIR 100 YEARS OF HERITAGE IN CHINA AND THEY SAID THE PMI DOESN'T MATTER. THAT'S BASICALLY WHAT THE TOP BANK IN FRANCE AT WITH ALL OF THE EMOTION OF THE FRENCH DISTRICT IN SHANGHAI. JONATHAN: WILL THEY DO SOMETHING ABOUT PROPERTY? LISA: IS IT BECAUSE THERE'S SO MUCH SPECULATION ABOUT DECLINE? I DON'T KNOW. HOW MUCH IS THIS A SHIFT WE HAVE SEEN IN TERMS OF CEOS IN THE U.S. GOING TO CHINA AND POSSIBLY TRYING TO OPEN UP MORE BECAUSE OF THE SITUATION IN THE ECONOMY? JONATHAN: THIS WEEK, JAMIE DIMON AND ELON MUSK. LISA: JAMIE DIMON HAS SHOWN HIS INTEREST IN PUBLIC OFFICE. JONATHAN: WE ARE HEARING MORE AND MORE ABOUT THAT. LISA: IF HE GOES TO CHINA HAS A NEUTRAL TONE AND GOES TO TAIWAN, WHAT IS THIS ABOUT? TOM: I THINK ANYTHING MR. DIAMOND DOES IS SCRUTINIZE. HE COULD GO OUT FOR A CUP OF COFFEE ON 5TH AVENUE AT THE BLUE NOTE CAFÉ AND PEOPLE ARE WONDERING WHAT IT MEANS. JONATHAN: THIS COMES AFTER OUR CONVERSATION THIS WEEK WITH HIM AND HE INDICATED HE WOULD LIKE TO SERVE HIS COUNTRY. TOM: IN LISA'S DEFENSE, EVERY YEAR, THERE IS A THEME TO THE ANNUAL ROOF WHAT AND WHEN YOU'RE WAS HARD WORK AND THIS YEAR WAS GEOPOLITICS. JONATHAN: BILL ACKMAN TALKED UP JAMIE DIMON RUNNING FOR PRESIDENT. LISA: I'M NOT SURE THAT HELP THE CONVERSATION. TOM: IF JAMIE DIMON WAS HAVING A CUP OF COFFEE WITH BILL ACKMAN NEXT TO THE GUGGENHEIM, GUESS WHAT? JONATHAN: THAT'S A GOOD CAFÉ. IT'S NEXT DOOR TO THE CHURCH. TOM: I TRY TO GET DOWN INTO THE 70'S IN MANHATTAN. JONATHAN: I'M WITH YOU. THAT'S A GREAT PLACE. SORT OF LIKE INSIDE THE CHURCH. TOM: THE AVOCADO IS A RELIGIOUS EXPERIENCE. JONATHAN: GET THERE EARLY. TOM: YEAH, IT'S ON EVERY TOURIST LIST. HAVE YOU BEEN TO THE GUGGENHEIM? JONATHAN: NO. TOM: YOU HAVE TO GET THERE, IT HAS A REAL SOUL. JONATHAN: I WILL CHECK IT OUT. >> WE'VE LEARNED YOU HAVE TO BE CAUTIOUS AND TACTICAL IN THIS MARKET. THIS IS BLOOMBERG SURVEILLANCE WITH TOM: HAVE YOU BEEN TO THE GUGGENHEIM? JONATHAN: NO. I WALKED PAST IT A LOT. ALRIGHT, I WILL CHECK IT OUT. FUTURES ARE POSITIVE FROM NEW YORK, THIS IS BLOOMBERG. ♪ >> THE ECONOMY HASN'T SLOWED MUCH AT ALL. >> THIS IS A RECESSION POSTPONED, NOT CANCELED. >> EVEN IF WE HAVE A RECESSION I WOULD CONSIDER THIS A SOFT LANDING SCENARIO. >> I THINK YOU HAVE TO BE CAUTIOUS, YOU HAVE TO BE TACTICAL IN THIS MARKET. >> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO AND LISA ABRAMOWICZ. JONATHAN: LIVE FROM NEW YORK CITY THIS MORNING. GOOD MORNING, FOR OUR AUDIENCE WORLDWIDE. ALONGSIDE TOM KEENE AND LISA ABRAMOWICZ I AM JONATHAN FERRO. YOUR EQUITY MARKET IS POSITIVE BY 0.5 PERCENT. PAYROLLS ARE 19 MINUTES AWAY. LOTS OF TALKS ABOUT THE POTENTIAL FOR STIMULUS OUT OF CHINA. TOM: FIVE GOES ON, WE WAKE UP TO THE SENATE SOLUTION. WE WAKE UP TO THE BEIJING SOLUTIA IN CHINA. WE WILL WAKE UP WITH THE JOBS REPORT THE CHANGES FED POLICY GOING INTO JUNE 14. I'M NOT SURE WHICH WAY IT WILL CUT. JONATHAN: LISA HAS BEEN NAILING THIS. YOU EMPHASIZE THE IMPORTANCE OF THIS PAYROLL SPREAD IN REGARDS TO WHAT THEY DO AND DON'T DO. LISA: IT SEEMS LIKE THEY WANT TO PAUSE AND IT WILL MAKE A DIFFERENCE UNLESS THERE'S SOME KIND OF BLOW OUT. IF WE GET SOMETHING DIFFERENT, IT IS A TOUGH MOMENT WHEN THERE IS SO MUCH CONFLICTING DATA. JONATHAN: THE CPI IS AFTER THIS ONE AS WELL. AFTER GOVERNOR JEFFERSON AND PRESIDENT HARKER? LISA: HOW CAN YOU PUSH BACK AGAINST THEM SAYING WE ARE GOING TO SKIP? TOM: LOOK AT THE THREE-MONTH MOVING AVERAGE, HOW DO THEY PAUSE/SKIP. THE DATA IS THE DATA. JONATHAN: E CUMULATIVE TIGHTENING OVER THE PAST 12 MONTHS. THEY WANT TO LOOK A BIT MORE AS SEE THE DAMAGE DONE. WHEN YOU LOOK AT THE LABOR MARKET DATA, IT LOOKS DECENT. LOOK AT MANUFACTURING, MANUFACTURING WORLDWIDE IT IS SCREAMING RECESSION. MANUFACTURING IN EUROPE, AND CHINA, IN THE UNITED STATES IS BAD. LISA: HOW DO YOU MAKE SENSE OF THE RECESSION YOU ARE SEEING IN MANUFACTURING IF IT IS SIMPLY EATING INTO THE SERVICES SECTOR? THEY WILL BE A REAL QUESTION ABOUT WEAKNESS IN OTHER AREAS ? JONATHAN: IN 2015 WE HAD A CONVERSATION AROUND A CONVERSATION AROUND RECESSION IN CHINA. TOM: YOU KNOW WHERE I AM ON CHINA. THE AGGREGATION OF ECONOMIC DATA . THE VIX 14.2, TO MEAN JOHN, IT IS JUST ABOUT EQUITY MARKETS ADJUSTING. JONATHAN: EQUITIES ARE UP BY 0.5%, LET'S GO THROUGH THE PRICE ACTION. FUTURES ARE POSITIVE, YIELDS ARE HIGHER BY A SINGLE BASIS POINT. THE EURO TRYING TO FIND STRENGTH BUT STRUGGLING. CRUDEST OF BY 1.5%. -- CRUDE IS UP BY 1.5%. LISA: AT 8:30 WE WILL GET THE PAYROLLS REPORT. THERE HAVE BEEN 13 STRAIGHT MONTHS OF UPSIDE SURPRISES. HOW DOES THINK IT -- HOW DOES IT GET PARSED OUT AT A TIME WHEN THE UNEMPLOYMENT RATE IS HISTORICALLY LOW. THE FED WOULD LIKE TO SEE SOME LOOSENING ON THAT MARKET. TODAY WE SPEAK TO DANIEL PINTO AND JANE FRASER. THIS WEEKEND THE OPEC+ MEETING IN VIENNA ON SATURDAY AND SUNDAY. TOM: TO BE CLEAR, THIS IS AN OPEC+ MEETING, RUSSIA WILL BE THERE? JONATHAN: THAT'S WHAT THE PLUS INDICATES. IT'S BEEN THAT WAY FOR A WHILE NOW. IT'S WONDERFUL TO CATCH UP WITH YOU, PAYROLL IS ABOUT 85 MINUTES AWAY. WHAT ARE THE CHANCES OF A RATE HIKE THIS MONTH? WIN: IT'S STRANGE TO ME THAT THE FED IS TALKING ABOUT ESCAPE. I FIND IT VERY PUZZLING. IF YOU LOOK AT THE JOLT DATA, IT LOOKS LIKE WE GET A UPSIDE SURPRISE. AS YOU POINT OUT, THERE IS ALSO DATA LATER IN THE MONTH, IT SHOULD BE DATA DEPENDENT AND TO -- I THINK MARKETS GOT OVERLY BULLISH ON THE CHINA STORY. THE PPI IS IN INFLATIONARY TERRITORY ON THE MAINLAND AT 0.02% IT MAY END UP HELPING THE GLOBAL ECONOMY. CHINA GROWING AFTER REOPENING, IS PART OF THE MATURING OF AN EMERGING MARKET ECONOMY. CHINA IS STARTING A GAME CHANGER FOR COMMODITIES. WE'RE JUST SEEING THE BEGINNING OF THAT. JONATHAN: SHOULD EQUITIES BE UP OUT OF CHINA AFTER THE REPORTING THIS MORNING. WIN: IF YOU LOOK AT COAL PRICES, IRON ORE, OPEC IS TALKING ABOUT A PRODUCTION CUT. THE GLOBAL RECOVERY STORY, WE HAVEN'T SEEN A RECESSION IN THE U.S. YET BUT THAT IS COMING. THE TIMING IS THE QUESTION. IS NOT A GLOBAL FINANCIAL CRISIS, WE WILL GO BACK TO A NORMAL BUSINESS CYCLE. JONATHAN: AMANDA KEY SAID YESTERDAY, EVERY YEAR FOR THE LAST HOWEVER MANY YEARS WE HAVE BEEN TALKING ABOUT A RECESSION. WE DID IT ALL LAST YEAR. TOM: 18 MONTHS, THREE MONTHS? LISA: HOW DO YOU DATA THAT IS COMING AND SURPRISING THAT HAS NOT CONFIRMED THE RECESSION. TOM: IT'S NOT ABOUT A RECESSION, IS THAT HALF OF AMERICA IS FLAT ON THEIR BACK AND ONLY A QUARTER IS PROSPERING. YOU HAVE .5% GDP GROWTH? JONATHAN: NO ONE IS WAITING FOR A GROUP OF ECONOMISTS TO GET TOGETHER AND SAVE THAT WAS IT. IF YOU WANT TO QUOTE THAT CAPTURES WHAT YOU SAID ABOUT AMERICA BEING FLAT ON HIS BACK. DOLLAR GENERAL IS SAYING THAT THEIR CUSTOMERS HAVE TO RELY MORE ON FOOD BANKS, CREDIT CARDS. I LOOKS AT A CHART YESTERDAY, DELINQUENCY RATES TO CREDIT CARDS ARE NOT MOVING IN THE RIGHT DIRECTION. LISA: THIS IS A SERIOUS ISSUE FOR A LOT OF PEOPLE. JONATHAN: I WILL TELL YOU A STORY ABOUT A GUEST COMING ON SET. I'LL TELL YOU ABOUT THAT IN ABOUT 20 SECONDS. YOU SHOULD HAVE SEEN THE GUEST FACE LIGHT UP. TOM: YES AIMING, I WILL READ NADIA'S RESEARCH. LISA M: CHINA'S AMBASSADOR SAYS IT WILL HOLD MEANINGFUL TALKS AS BEIJING TRIES TO BROKER PEACE. TRYING TO KN NEGOTIATE AN END TO UKRAINE. IN SINGAPORE, PENTAGON CHIEF ARE AMONG 600 MILITARY LEADERS, POLICYMAKERS TAKING PART OF THE SHANGRI-LA DIALOGUE. BEIJING HAS RULED BETWEEN THE TWO MILITARY CHIEFS FRUSTRATED THAT THE U.S. IS NOT REMOVE SANCTIONS. NEW AI DEVELOPMENTS THAT ARE SO POWERFUL THEY'RE NOT EVEN SURE THEY SHOULD BE OFFERED TO SOME CUSTOMERS. HE'S WORRIED ABOUT PROVIDING TOOLS TO LOCAL LAW ENFORCEMENT'S FOR SURVEILLANCE. >> YOU SAID THE DEMAND WAS HUGE CAN YOU QUANTIFY THAT? >> WE HAD A NUMBER OF INBOUND CALLS. >> THIS DEMANDED A BIPARTISAN SOLUTION, WE KNEW WE NEEDED TO COME TOGETHER AND SO I AM HAPPY TO STAND HERE PASSING THIS CRITICAL, VITAL PROGRAMS AND AVOID CATASTROPHIC DEFAULT. JONATHAN: LEAVING THIS DRAMA BEHIND TOM. TOM: I WONDER HOW FAR DOWN THE ROAD, DOWN THE ROAD IS? JONATHAN: CONSIDERING WHERE HE WAS, 15 VOTES IT TOOK TO BECOME SPEAKER. THEY MANAGED TO PASS A BILL. THEY MANAGED TO COME TO AN AGREEMENT WITH THE PRESIDENT WHO SAID HE WOULD NOT NEGOTIATE OVER THE DEBT CEILING AND THEN DID. WE ARE MORE THAN 500 DAYS OUT UNTIL THE NEXT ELECTION CYCLE AND IT'S A DIVIDED GOVERNMENT. LISA: YOU TALK ABOUT THE DIVISIONS IN THE REPUBLICAN PARTY, I'M CURIOUS ABOUT THE DIVISIONS IN THE DEMOCRAT PARTY. TIM KAINE TRIED TO OUT THE PIPELINE PROVISIONS AND PERMITTING PROCESS FOR JOE MANCHIN. WHAT DO YOU MAKE OF THIS GOING FORWARD HOW THIS REPRESENTS THE POLARITIES OF THE DEMOCRATIC PARTY? ANNMARIE: THIS IS ON FULL DISPLAY DURING THE PRESIDENT'S FIRST YEAR WHEN IT WAS JOE MANCHIN VERSUS THE WHITE HOUSE. WHEN IT COMES TO THIS PIPELINE, WHAT TIM KAINE TOOK ISSUE WITH WAS IT WAS IN THE DEBT CEILING BILL AND IT AFFECTS HIS STATE OF VIRGINIA. THERE A LOT OF HARSH CRITICISM OF THE WHITE HOUSE BECAUSE OF THIS. BUT THE WHITE HOUSE WILL SAVE THE PIPELINE WAS ALWAYS GOING TO HAPPEN. WHETHER OR NOT YOU LOOK ON THE LEFT OR THE RIGHT THERE ARE OBVIOUS DIVISIONS IN THE PARTY. THIS BILL DOES SHOW A PRESIDENT THAT HAD TO MOVE TO THE CENTER AND SIT DOWN WITH SENATOR MCCARTHY TO MAKE SURE THERE WAS NO DEFAULT. TOM: THE PRESIDENT HAS TO STEP UP TO THE PODIUM AND HE WILL BE MAKING A JOKE ABOUT LOOKING AT SANDBAGS ON THE FLOOR. THE AGE THING AS WELL. I WAS WATCHING MANCHESTER UNITED, DO HIS LEGS WORK? ANNMARIE: I THINK IT'S LESS ABOUT THE PRESIDENT FOLLOWING AND MORE ABOUT WHAT THIS MEANS. 77% OF AMERICANS THOUGHT THE PRESIDENT WAS TOO OLD TO HAVE ANOTHER TERM. WHEN YOU SEE HIM FOLLOWING ITS THOSE TYPE OF HEADLINES THAT ARE CONCERNING TO THE DEMOCRATIC PARTY. JONATHAN: THE LATEST FROM WASHINGTON DC AND BEYOND. WHO WAS P HILLARY CLINTON'S RUNNING MATE? IT WAS TIM KAINE. DO YOU REMEMBER THAT? HE IS A NICE GUY. TOM: TOMORROW MORNING, MANCHESTER YOU, IS LIKE A NATIONWIDE BASEBALL TOURNAMENT AND THEN THE YANKEES PLAY THE METS? IS THAT THE EQUIVALENT? JONATHAN: IT IS A VERY OLD CUP COMPETITION AND IT GOES ALL THE WAY DOWN TO THE LOWER LEAGUES. ANYBODY CAN END UP IN THE FINAL. SO YOU CAN HAVE REALLY BIG CLUBS WITH REALLY SMALL TEAMS. TOM: WILL THE NATION BE RIVETED BY THE RED AND BLUE OF MANCHESTER? JONATHAN: MANCHESTER CITY IS GOING FOR THE LEAGUE TITLE, THE CHAMPIONS LEAGUE. THEY MAKE OUT THE OPPORTUNITY TO STOP THEM FROM WINNING EVERYTHING. TOM: MAN CITY HAS THE MONEY? JONATHAN: THEY ARE THE WINNERS RIGHT NOW. THEY TOM: ARE DOMINATING EVERYTHING. TOM:WHEN I WATCH THE MEDICINE AMATEUR, THERE ARE NO WEAK PLAYERS. JONATHAN: THAT IS BECAUSE THEY SPEND A HUGE AMOUNT OF MONEY. BRAMMO FOLLOWS THIS NOW TOO. TOM: ARE YOU GOING TO WATCH THIS TOMORROW? IS THIS A BIG ENOUGH DEAL TO YOU? ♪ I THINK WE'RE DEFINITELY SEEING WEAK SPOTS. MIDDLE HIRE INCOME CONSUMERS ARE DOING OK. WE SEE A TRAY DOWN, RECESSIONARY IS PULLING BACK. THERE IS LESS PENT-UP DEMAND, LESS SAVINGS. WHY WOULD DISCRETIONARY SPENDING BE SO STRONG? TOM: WHAT NUMBER DO YOU NEED TO SEE EQUATING INTO A THREE MONTH MOVING AVERAGE ON NONFARM PAYROLLS THAT CHANGES THE FED TO PAUSE? SARAH: THE BAR IS MUCH HIGHER. THERE WAS FOCUS EARLIER ON THE WEEK ON PAYROLLS AND JEFFERSON SQUASHED A LOT OF THAT. TOM: GIVE ME A NUMBER? SARAH: IF WE SAW TWO MONTHS OF AN ACCELERATION IN PAYROLLS. THERE WOULD BE A CONCERN THAT JOBS ARE RE-ACCELERATING. LISA: WHAT'S MORE IMPORTANT JOB ROLES OR PAY GROWTH? SARAH: IT WOULDN'T MATTER WHERE WE ARE ON THE THREE-MONTH AVERAGE. IT'S COMING DOWN FROM 220,000 TO 196,000. THERE IS STILL ROOM FOR AN UPSIDE SURPRISE. WE WOULD HAVE THE THREE-MONTH MOVING AVERAGE COMING DOWN. FIVE OUT OF THE LAST SIX YEARS APRIL GETS REVISED DOWN IN MAY. JONATHAN: WHY IS THAT? SARAH: THERE IS A HIGHER SEASONAL HURDLE. THAT CAUSES SOME DOWNWARD REVISION. IT'S ALSO THE FACT THAT THE SEASONAL HURDLE THIS PAST MONTH WAS 640 THOUSAND. TYPICALLY IT'S 800,000. IF WE SAW AN ADJUSTMENT TO HISTORIC SEASONALS , WE HAD MASSIVE DOWNWARD PROVISIONS. JONATHAN: I'M INTERESTED IN HOW THE CONVERSATION CHANGES COMPARED TO WHERE WE ARE NOW. A COUPLE OF MONTHS AGO WE TALKED ABOUT COMMUNICATING THE PAUSE AND HOW HIGH THE BAR WOULD BE FOR CUTS. AND NOW WE'RE TALKING ABOUT A SKIP. WHAT HAS CHANGED IN THE PAST MONTH OR SO? SARAH: WE GOT WEAKER DATA THEY CAME OUT. WE HAD A SOFT BEIGE BOOK COME OUT. JONATHAN: HE DOESN'T READ THE BEIGE BOOK, HE HAS NEVER READ THE BEIGE BOOK. SARAH: I READ IT TOP TO BOTTOM. THANK YOU FOR HAVING ME. IT WAS SOFTER, ECONOMIC ACTIVITY , LITTLE HAS CHANGED. THERE IS YOUR PERCENT GROWTH IN THE SECOND QUARTER. THERE IS A PULLBACK IN DISCRETIONARY. THERE ARE ELEMENTS OF WEAKNESS THAT WE ARE SEEING COMING THROUGH THE DATA AND THAT HAS REFLECTED SOME THE FED SPEAK AS WELL. LISA: HAVE WE CURTAILED THE FEARS OF A RECESSION? SARAH: I THINK PEOPLE ARE FINALLY REALIZING THAT THE WAY THAT INFLATION WAS SURPRISING TO THE UPSIDE WE COULD ALSO SEE IT COME DOWN THE SAME WAY. THE LABOR MARKET DATA AND WHAT WE ARE SEEING ON NEW ORDERS FOR ISM COMING DOWN, THESE ARE GOOD INDICATORS THAT GOODS DEFLATION IS GOING TO CONTINUE. LISA: WE SPOKE WITH BOB MICHELE AND HE SAID HE EXPECTS A RAPID DEFLATION IN CERTAIN SECTORS. DO YOU THINK WHAT WE HAVE SEEN OVER THE PAST FEW MONTHS WITH WAGES THAT HAVE SLOWED DOWN, DO YOU EXPECT A MUCH FASTER RATE OF DISINFLATION THEN YOU PREVIOUSLY THOUGHT? SARAH: WE HAVE THE LABOR MARKET SLOWING, WE WILL COME TO 40,000 JOBS. THAT WILL HELP BRING WAGES DOWN AND THAT WILL LEAD THROUGH TO CORE SERVICES INFLATION. ALL LEADING INDICATORS ARE POINTING TO BROAD-BASED DEFLATION. JONATHAN: DO YOU THINK WE CAN GET TO 4.5% UNEMPLOYMENT. SARAH: WE WILL BE 4.1% BY THE END OF THE YEAR. 4.5% WILL BE HARD TO ACHIEVE. YOU WOULD HAVE TO SEE SOME BIG JOB PRINTS. JONATHAN: HOW WILL THEY JUSTIFY NOT HIKING? SARAH: I DON'T THINK THEY NEED TO TOUCH INFLATION OR THEIR ECONOMIC PROJECTIONS ON GDP. LOWER UNEMPLOYMENT SAYS THEY WERE ABLE TO REACH THEIR TARGET WITHOUT HURTING THE LABOR MARKET WHICH WAS IN LINE WITH POWELL'S ORIGINAL COMMENTARY THAT WE CAN GET HIRING TO COME DOWN WITHOUT LAYOFFS WHICH IS BETTER THAN THEY ASKED ACTED. JONATHAN: WILL THEY SKIP JUNE AND CONTINUE IN JULY? SARAH: I DON'T THINK THEY WILL MOVE THE. PLOT. IT IS STATED DEPENDENT SO ANYTHING CAN HAPPEN. WITH INFLATION COMING IN LINE WITH EXPECTATIONS THERE IS NO REASON TO CHANGE THE DOT PLOT. JONATHAN: SARAH WOLF FROM MORGAN STANLEY. THERE WILL BE PEOPLE SATISFIED WITH THE RATES WE HAVEN'T OTHERS WHO WANT TO GO HIGHER. LISA: IF UNEMPLOYMENT IS NOT TAKING A HIT, CAN THEY CELEBRATE VICTORY OR ARE THEY LEAVING THINGS TO STICKY? DO PEOPLE GO FURTHER AND WANT TO SEE MORE DESTRUCTION IN THE LABOR MARKET WHEN IT IS AGAINST THEIR MANDATE? JONATHAN: I AM REALLY LOOKING TO THAT SPEECH IN JACKSON HOLE. WHERE IS UNEMPLOYMENT GOING TO BE IN AUGUST? TOM: LATE AUGUST WILL BE REALLY INTERESTING. JONATHAN: THE FED GOVERNOR WILL BE JOINING US IN ABOUT 30 MINUTES TIME. JUST AHEAD OF PAYROLLS, 48 MINUTES AWAY. THIS IS BLOOMBERG. ♪ LISA M: KEEPING YOU UP-TO-DATE WITH NEWS FROM AROUND THE WORLD, CHINESE AMBASSADOR SAYS IT WOULD BE DIFFICULT FOR RUSSIA AND UKRAINE TO IN THEIR CONFLICT. LEE HAS BEEN TAXED TO NEGOTIATE THE END OF THE WAR IN UKRAINE AT PROJECT TARGETED BY PRESIDENT XI. TURKEYS PRESIDENT WILL TAP A NEW SECRETARY OF TREASURY. IT WILL STORE UP MARKET CONFIDENCE. ERDOGAN WON REELECTION EXTENDING HIS TWO DECADES IN POWER. NETFLIX SHAREHOLDERS REJECTS PAY PACKAGES FOR LEADERSHIP INCLUDING TED SARANDOS AND PETERS. HE WAS SUPPOSED TO MAKE $40 MILLION WHILE PETERS IS SUPPOSED TO MAKE 34.6 MILLION. NETFLIX BOARD CAN REJECT THIS. THE U.S. IS PRAISE THE ROLE THAT THESE SATELLITES HAVE PLAYED. GLOBAL NEWS POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN MORE THAN 120 COUNTRIES. I AM LISA MATEO AND THIS IS BLOOMBERG. ♪ >> THEY'RE GOING TO TAKE A PAUSE BECAUSE THEY ARE MONITORING MONETARY POLICY AND BUT THEY CHARACTERIZE IT AS A SKIP BECAUSE THEY THINK THEY WILL HAVE TO DO A LITTLE MORE AND WE WILL SEE THAT IN THE SUMMARY. PENCILED IN FOR 2023. JONATHAN: THANK YOU FOR WRITING IN EVERYONE, I THINK YOU NEED TO HAVE A BLOOMBERG EDUCATIONAL ROADSHOW SO HE CAN IMMERSE HIMSELF IN ALL THINGS BRITISH. WIMBLEDON, THE CITY OF LONDON. TOM: THIS IS IMPORTANT. NATIONAL DONE THAT DAY, SAUSAGE ROLLS. I WAS A JUBILEE STATION, WE SHOULD HAVE GREG SAUSAGE ROLL DAY. THEY ARE PHENOMENAL. THEY HAVE TO BE MORE NUTRITIOUS THAN A DOUGHNUT? JONATHAN: I AM NOT SURE ABOUT THAT. IF YOU ARE JUST TUNING IN WE HAVE A SERIOUS CONVERSATION ABOUT PAYROLLS. WE ARE ABOUT 4 3 MINUTES AWAY. THE S&P 500 IS ENCOURAGED BY THAT WE COULD GET A PACKAGE OF SUPPORT FOR PROPERTY. PROPERTY DEVELOPERS ARE RALLYING. A RALLY IN COMMODITIES, CRUDE IS UP 1.58%. I CAN TELL YOU WHERE THE 10-YEAR IS, IT'S AROUND 360 AT 3.59. TOM: I GO BACK TO A VIX OF 15.45. WHAT'S INTERESTING ABOUT THAT MOVE, IT IS NOT ABOUT THE DATED ALL. THERE ARE CLAIMS, JOB VACANCIES. IT'S NOT ABOUT THE DATA. GOVERNOR JEFFERSON, FED FUNDS VICE CHAIR. POURING COLD WATER OVER THE JUNE DECISION. LISA: AT SOME POINT DO WE REALLY SEE ANY UPSIDE SURPRISE . TOM: THIS IS A TRAP AT 7:49. ANNA WONG, WE COULD HAVE A HUNDRED PERCENT FED CHAT BECAUSE SHE HAS BEEN SO RIGHT ABOUT MONETARY POLICY UNITED STATES. WE DIGRESS TO THE STATE OF THE AMERICAN ECONOMY. DO YOU AGGREGATE WHEN YOU LOOK AT THE LABOR ECONOMY OR DO YOU LOOK AT PARTS OF THE LABOR ECONOMY. DR. WONG: WE LOOKED AT WHICH STATES ARE CURRENTLY IN RECESSION AND WE FOUND THAT 30% OF THE U.S. POPULATION IS CURRENTLY LIVING IN STATES THAT FULFILL THE PSALMS RULE WHICH IS AN IDENTIFICATION FOR CONCURRENT OCCURRENCE OF RECESSION. WE LOOKED AT SMALL FIRMS VERSUS LARGE FIRMS. LARGE FIRMS ARE THE PLACES THAT ARE LAYING OFF WORKERS, DOMINATING HEADLINES. THE SMALL FIRMS WERE NOT ABLE TO HIRE AS MANY WORKERS DURING THE PANDEMIC. EVEN THEY ARE DROPPING THEIR HIRING PLANS AND STARTING TO LAY OFF OR FREEZE HIRING. TOM: DO WE HAVE A CLEAR PICTURE OF THE TECHNOLOGY OVERLAY ON THE AMERICAN ECONOMY, ON OUR LABOR ECONOMY? I WOULD GUESS IT WOULD TAKE 10, 20 YEARS FOR PEOPLE TO FIGURE OUT THE TECHNOLOGY OVERLAY? ANNA: I HAVE LOOKED AT DATA ON LAYING OFF WORKERS. SOME EMPLOYERS ARE REFERENCING AI AS A REASON FOR LAYING OFF WORKERS. I THINK THE POWER OF AI COULD LEAD TO ACCELERATED LAYOFFS FOR WHITE-COLLAR WORKERS WHO BENEFITED FROM REMOTE WORK AND ARE MORE SUSCEPTIBLE TO BEING LAID OFF BECAUSE OF AI GOING FORWARD. LISA: DO YOU THINK IT IS PROBABLE THAT THE UNEMPLOYMENT RATES WILL RISE TO 4.5% OR WILL THERE BE A SEISMIC JUNK THAT IS NOT AS LINEAR AS SOME OF THE RECENT PROGRESSIONS HAVE SHOWN? ANNA: IF A RECESSION BEGAN IN THE SUMMER, SAY IN JULY OR AUGUST, WE LOOKED AT THE HISTORICAL PROGRESSION OF THE PAYROLL AND IT'S ENTIRELY POSSIBLE TO SEE AN UNEMPLOYMENT RATE GOING TO 4.4% IT IS CONDITIONAL IF IT HITS DURING THE SUMMER. LISA: WHY ARE DIFFERENT REGIONS PERFORMING SUCH A RELAY? ANNA: IN THE CURRENT ECONOMY WE HAVE A TECH RECESSION, A MANUFACTURING RECESSION AND IF YOU LOOK AT THE STATES, CALIFORNIA WOULD BE AFFECTED BY A TECH RECESSION. WE ARE EXPERIENCING A ROLLING RECESSION WHERE YOU HAVE SOME STATES THAT HER HEADFIRST. THE BIG QUESTION IS WHETHER THE OTHER STATES, STATES THAT HAVE A MORE DIVERSE INDUSTRY BASE, EQUAL IN TECH, FINANCE, MANUFACTURING. THOSE STATES ARE DOING WELL AND THERE'S A QUESTION IF THEY WILL DO WELL AND SO FAR THEY DO. TOM: COLUMBUS, OHIO, 3.4. JONATHAN: ANNA WONG WITH BLOOMBERG ECONOMICS. THE NATIONAL AVERAGE AT 3.5%. TO YOUR POINT, THAT HAS BEEN THE POST-PANDEMIC STORY. DO YOU REMEMBER THAT CRITICISM ABOUT THE WHITE HOUSE GIVING OUT TOO MUCH MONEY. UNEMPLOYMENT IS SLOW AND PEOPLE HAVE TO GET BACK INTO THE WORK POPULATION IN THOSE CONVERSATIONS DIED QUICKLY. LISA: RIGHT NOW, WHAT YOU ARE GETTING IS A GROWING SENSE OF SOFTENING POINTING TO A MUCH MORE QUICKLY SOFTENING JOBS MARKET. PEOPLE ARE QUITTING LESS. THE BACK TO OFFICE TREND IS VERY MUCH A CORRELATION WITH THE JOB MARKET. IF YOU ARE MORE CONCERNED ABOUT KEEPING YOUR JOB YOU'RE MORE INCLINED TO GO TO THE OFFICE AND YOUR EMPLOYER WILL BE MORE INCLINED TO ASK YOU TO COME TO THE OFFICE. JONATHAN: YOU THINK THE LEVERAGE IS SHIFTING AWAY FROM THE EMPLOYEE AND BACK TO THE EMPLOYER? LISA: META-SAID THEY WOULD LIKE TO SEE PEOPLE BACK IN THE OFFICE AND YET, HOW MUCH PROTEST CAN THEY DO WHEN THEY ARE LAYING OFF SIGNIFICANT PARTS OF THE WORKFORCE? JONATHAN: THREE DAYS A WEEK ISN'T SO BAD IS IT? LISA: FOR US IT WOULD BE LUXURIOUS. BUT FOR PEOPLE WHO SET UP THEIR LIVES IN THE PAST FEW YEARS TO BE WORKING FROM HOME, HOW DO YOU READJUST WITHOUT A PAY RISE IN STRUCTURAL CHANGES TO YOUR LIFE. JONATHAN: ESPECIALLY TECH MINING, MONEY TO GET OUT OF SAN FRANCISCO. GET SOMEWHERE WITH THE BACKYARD, CASH AND NOT MEDITECH. -- META CHECK. WE ARE ON THE SAME PAGE ABOUT THIS, HAVE A TWO PAY TIER SYSTEM. LISA: I THINK PEOPLE ARE LESS ENGAGED WHEN THEY'RE WORKING AT HOME. >> THERE IS THIS MOUNTAIN OF CASH THAT CONSUMERS HAD ON THEIR BALANCE SHEET. WE SEE THAT STARTING TO DWINDLE NOW. >> THE U.S. WILL BE MORE RESILIENT THAN ANTICIPATED. >> THE BIGGER SHOCK IS THE DATA OUTSIDE THE U.S.. >> THEY CRYSTAL POINTING TO RECESSION. >> I THINK IT'S HARD TO AVOID A RECESSION. >> THIS IS BLOOMBERG SURVEILLANCE WITH TOM KEENE, JONATHAN FERRO, AND LISA ABRAMOWICZ. TOM: JOB STAY ON RADIO AND TELEVISION. BEHIND THE HEADLINE DATA IS CROSS IN THE BUILDING? JONATHAN: I HAVEN'T SPOTTED HIM YET BUT I'M TOLD HE'S GOING TO BE HERE IN A FEW MINUTES. TOM: IT WILL BE AN INTERESTING CONVERSATION. IT'S AN INTERESTING JOB STAY AND IT'S WRAPPED AROUND A STOCK MARKET THAT WON'T QUIT GOING HIGHER. TWO ITEMS OF NEWS HERE. MAYBE LET'S COMBINE THEM RIGHT NOW. CHINA, WE NEED STIMULUS BLOOMBERG REPORTS FROM OUR TEAM IN CHINA. HENRY HORTON SAYS ALL CLEAR. JONATHAN: BUT LET'S SICK WITH CHINA FIRST. CONSIDERING A PACKAGE TO SUPPORT THE PROPERTY MARKET. PAYROLLS LATER THE GOOD THINK ABOUT TODAY IS THE DATA IS GOOD. IT'S JUST KIND OF GOOD NEWS. IT DOESN'T MEAN MUCH FOR THE FED IN JUNE. THAT MIGHT CHANGE BUT BASED ON WHAT WE KNOW SO FAR THAT'S THE INTERPRETATION. ULTIMATELY, BASED ON THE COMMUNICATION FROM THE FED GOVERNOR, IT DOESN'T LOOK LIKE IT'S GOING TO CHANGE WHAT THEY THINK THEY TOM: SHOULD DO THIS MONTH. TOM:MAY BE DATA DEPENDENCY DOESN'T MATTER SO WE WILL SEE WHEN MIKE MCKEE GIVES US THE DATA. LISA, YOU MENTIONED THE REVISIONS. I'M GOING TO THE THREE MONTHS HAVING AVERAGE. LISA: HOW MUCH IS THE RISK TO A DOWNSIDE SURPRISE? IF THE FED HAS BASICALLY CAPPED THE REACTION FUNCTION TO AN UPSIDE SURPRISE, WHAT HAPPENS IF YOU GET NEGATIVITY IN THIS IDEA THAT JOB CREATION IS MUCH WEAKER THAN PEOPLE EXPECTED. JONATHAN: MORGAN STANLEY 250 WOULD GET IT DONE. WITHOUT A BIG REVISION TO THE PREVIOUS MONTH. LISA: CORRECT. JONATHAN: THEN YOU HAVE CPI ON THE 13TH. WE'VE HAD SO MANY UPSIDE SURPRISES OVER THE LAST YEAR. I DID WHEN ABOUT 30 SECONDS AND THEN GET BLOWN UP IN 28 MINUTES TIME. TOM: PART OF IT IS GOING TO BE WAGE FOR THIS WELL. THERE IS A PRESUMPTION OF NOMINAL WAGE GROWTH AS MAY BE COMING IN A LITTLE BIT. DISINFLATION DYNAMIC COMES INTO THAT. IT'S NOT JUST ABOUT PAYROLLS. I'M FASCINATED BY WHAT WE'VE SEEN TODAY. I HAVE BEEN SO WRONG FOR 90 DAYS. JONATHAN: YOU'VE NOT BEEN THE ONLY ONE, TOM. EQUITY FEATURES AS TOM INDICATED POSITIVE THIS MORNING. IT'S A LIFT IN THE EQUITY MARKET ON THE S&P 500. HEADING TOWARDS A THIRD WEEK OF GAIN ON THE NASDAQ. THE NASDAQ 100 IS ON CAUSE OR A SIX CONSECUTIVE WEEK OF GAINS. THE LONGEST STREAK GOING BACK TO 2021. DOWN ABOUT 20 BASIS POINTS AT THE FRONT END ON A TWO-YEAR. PRETTY DECENT DATA WITH THE SEMI MANUFACTURING RIG. WHERE THE BULK OF THE COMMITTEE COVERING LESS AROUND THE IDEA THAT THEY CAN SKIP JUNE MAY BE LEADING TO JULY IF THEY NEED TO. TOM: WHERE THEY GO ON FROM THERE. AGAIN THE LIFT IN RATES IS A 50 BASIS POINT LEFT. JONATHAN: ABSOLUTELY BESTED. TOM: BUSTED, THERE IT IS. JONATHAN: I MIGHT GET IN TROUBLE FOR SHOWING THIS BECAUSE WE DON'T HAVE THE RIGHTS TO SHOW IT. LISA: THAT'S WHITE YOU'RE NOT LISTENING TO ANYBODY. JONATHAN: IT'S WATCHING PRACTICE. LISA: ARE YOU THAT BORED? TOM: IT'S YOUR FAULT. DANIEL RICARDO TOLD ME I HAVE TO WATCH PRACTICE TO GET A BETTER UNDERSTANDING. JONATHAN: THAT'S WHAT YOU'RE SO DISTRACTED. I GIVE UP. TOM: I'M READY TO TALK TO NADIA LEOVELL. I'M GLAD THE MAKEUP IS NOT SHOWING ME BLUSHING. NADIA, IT SEEMS LIKE THE STOCK MARKET IS GOING OPPOSITE OF ALL THE ANGST IN THE ECONOMICS. IS THAT TRUE? >> IT SEEMS SO. IT'S BEEN A TOUGH MARKET TO NAVIGATE AS WE KNOW THAT WE'VE SEEN A WIDE DISPERSION IN THE MARKET AND WE HAVE SEEN ONE OF THE NARRATIVES, PARTICULARLY FOR OUR MARKET THAT'S COMING OFF OF A BEAR MARKET. IT'S ONLY A THIRD OF THE S&P CONSTITUENTS OUTPERFORMING THE INDEX SINCE THE OCTOBER LOW. IF YOU LOOK OVER THE LAST MONTH, I'M SEEING DISCONTINUOUS NARRATIVE OF MARKET LEADERSHIP. IT'S NOT A HALLMARK OF A NEW CYCLE MEANING IT MAKES THE MARKET MORE VULNERABLE. IS REALLY THE POWERHOUSE OF LATE AND WE DO BELIEVE IN THAT TREND BUT WE THINK THERE IS A LOT TO BE DISCOUNTED RIGHT NOW AND WE JUST QUESTION THE RESILIENCY OF THIS MARKET GOING FORWARD. IT'S TRENDING TOWARDS THE UPSIDE SCENARIO DESPITE THE FACT THAT AS YOU NOTED THE DETERIORATED BACKDROP. WE JUST DON'T THINK ABOUT THIS COCKTAIL IS BEING VERY ADVERTISING AT THESE LEVELS. LISA: PERHAPS NOT AN OVERARCHING SCALE BUT I WONDER IF THERE'S OPPORTUNITY CREATED BY JUST HOW NARROW THE BREATH HAS BEEN AND OTHER LOSSES IN OTHER AREAS. THE NASDAQ IS OUTPERFORMING THE DOW OR DID BACK IN MAY BY 9.3 PERCENTAGE POINTS. THAT IS THE NINTH WIDEST IN HISTORY AT WHAT POINT DO YOU START LOOKING AT SOME OF THE DISCARDED COMPANIES AS SOMETHING OF AN OPPORTUNITY? >> WE HAVE BEEN. THE MARKET CONSUMER STAPLES AS WELL AS UTILITIES AND COUPLING THAT WITH RECIPROCAL EXPOSURE ON INDUSTRIALS. WE ARE CONCERNED ABOUT THE ECONOMY GOING FORWARD AND WE TO THINK THE ECONOMY WHETHER OR NOT WE END UP IN EVER SESSION WE THINK WE WILL PROBABLY NOT SEE ANY ECONOMIC GROWTH BY THE TIME WE GET TO THE END OF THE YEAR. WE THINK FROM A POSITIONING STANDPOINT YOU WANT TO CONTINUE TO LEAD INTO A DEFENSIVE AREA OF THE MARKET AND TAKE THE OPPORTUNITY TO SEE SOME CHIPS OFF OF THE AREAS OF THE MARKET THAT'S REALLY GOT UP AND IT'S FEELING A LITTLE CHOPPY AT THIS POINT. LISA: AFTER HEARING SO MANY PEOPLE SAY THEY'RE GOING INTO DEFENSES ARE THEY OVERPRICED RIGHT NOW? WHAT DOES IT MEAN TO BE DEFENSIVE AT A TIME WHEN THE ECONOMY IS GROWING AND THERE IS A ROLLING RECESSION IN DIFFERENT SECTORS? >> THERE IS A ROLLING RECESSION IN DIFFERENT SECTORS. BUT, AGAIN, WE HAVEN'T SEEN THE FULL IMPACT OF TIGHTER MONETARY POLICIES. WHEN YOU LOOK AT THE INDICATOR WHICH I THINK AS WE ARE POINTING OUT, WE PAY VERY CLOSE ATTENTION TO THE MANUFACTURING INDEX BECAUSE THAT TENDS TO HAVE A CORRELATION WITH EARNINGS GROWTH GOING FORWARD. THAT CONTINUES TO DETERIORATE. WE ARE SEEING A NORMALIZATION OF THE ADDITIONAL WEAKNESS AND WE KNOW THAT CREDIT LENDING HAS A VERY GOOD CORRELATION WITH JOB GROWTH PARTICULARLY FOR SMALL MIDSIZE BUSINESSES. WHILE WE ARE NOT SEEING THAT DETERIORATION IMMEDIATELY IT DOES POINT THAT THERE WILL BE SOME AHEAD. THAT'S WHY WE CONTINUE TO BELIEVE THAT THE DEFENSIVE POSITION IS THE RIGHT ONE IN THIS ENVIRONMENT OF UNCERTAINTY AS WE GET LATER INTO THE GEAR. JONATHAN: TRADE FOR THE BRAVE. NADIA, ARE YOU WILLING TO MAKE IT? THAT'S WHAT MARK BROUGHT UP THIS MORNING. >> WE DO HAVE A PREFERENCE FOR CHINA. THE RECOVERY THERE HAS BEEN AN EVEN, BUT WE ARE SEEING SOME ENCOURAGING DATA. PARTICULARLY ON THE SURFACE SIDE OF THE ECONOMY. WHEN YOU LOOK AROUND A FEW WEEKS AGO WE'VE BEEN LEANING MORE ON THOSE AREAS OF THE CHINESE ECONOMY. TOM: ARE WE MODELING IN DISINFLATION WHICH IS BOOSTING THE P/E RATIOS FOR THE PRESUMED RATIO OF THE MARKET AND PARTICULARLY THE PROFIT-MAKING TECHNOLOGY COMPANIES? IS THIS JUST THE STOCK MARKET GETTING OUT SIX MONTH OR DARE I SAY A YEAR AND EXPECTING A DISINFLATION? >> I THINK WHAT YOU SAY ABOUT TECH, PEOPLE ARE LOOKING TO OR THREE YEARS OUT FOR AI REVENUES THAT MIGHT NOT MATERIALIZE FOR EVERYONE. YES, WE DO FAVOR THE DATA AS WELL AS CYBERSECURITY AS PART OF OUR ABC TECH OF FRAMEWORK. WE DO THINK YOU HAVE TO BECOME INCREASINGLY SELECTIVE BECAUSE THERE'S A LOT RIGHT NOW DISCOUNTED PARTICULARLY IN THE -- IT'S ALSO ABOUT THE DISINFLATION WE ARE SEEING AND MORE ABOUT THE ENTHUSIASM ABOUT THE MARKET OPPORTUNITY FOR AI. JONATHAN: NADIA, THANK YOU. PAYROLL ABOUT 20 MINUTES AWAY. NOT WATCHING FORMULA ONE PRACTICE, THE FOLKS HAVE GOOD MORNING SHOW TASTE. THANK YOU. WE APPRECIATE THAT. EVEN THE VIEWERS APPRECIATED THE PROGRAM MORE THAN MAYBE YOU ARE. IS IT JUST PRACTICE? JUST PRACTICE. TOM: THIS IS AN IMPORTANT QUESTION BECAUSE EVERY WEEK THEY GO TO A DIFFERENT COURSE AND THEY HAVE SIMULATORS, RIGHT? AND SERIOUS STUFF. THEY HAVE TO MEMORIZE THE COURSE. JONATHAN: AND THEN THEY GET TO WORK OUT. TIES AROUND THIS TRACK, THOSE TIES ARE HOLDING UP. TOM: DO THEY NOT DO THAT IN PRACTICE? JONATHAN: DIFFERENT FUEL LOADS. TOM: THEY DUE TO PRACTICES. JONATHAN: AND THEN THEY GET A QUALIFIER WHICH IS WHERE YOU SIT. JONATHAN: THAT'S YOUR POSITION ON THE GRID. TOM: THIS IS BARCELONA AND IT LOOKS LIKE THE COURSE IS NOT AS TIGHT AS MONICA. JONATHAN: IS NOT THE SAME. FERNANDO, CAN HE GET A DENT IN HIS OWN COUNTRY? THAT'S A BIG DEAL. TOM: HE IS LOOKING FOR HIS 33RD VICTORY. JONATHAN: YOU KNOW MORE ABOUT THIS THAN I DO. TOM: I READ IT COVER TO COVER. JONATHAN: I'M AWARE. I DIDN'T KNOW WHAT YOU WERE TALKING ABOUT. TOM: THEY ARE MAKING BARCELONA LIKE IT USED TO BE UNLESS THEY CAN OPEN IT UP AND MAKE IT FASTER. JONATHAN: LOOKING FORWARD TO ANALYSIS NEXT WEEK. TOM: THIS WEEK? I'M GOING TO DO IT AFTER THE JOBS REPORT. JONATHAN: IT'S JUST PRACTICE, MAN. HOW DO YOU NOT KNOW THAT RANT? FORMER FED GOVERNOR WITH US VERY SHORTLY TO TALK ABOUT PAYROLLS. 18 MINUTES AWAY. >> KEEPING YOU UP-TO-DATE WITH NEWS FROM AROUND THE WORLD I'M LISA MATEO. IT WOULD BE DIFFICULT FOR RUSSIA AND UKRAINE TO CURRENTLY HOLD MEANINGFUL TALKS IN THEIR CONFLICT AS BEIJING TRIES TO BROKER A PEACE DEAL. HE HAS BEEN TASK TO WARN. PART OF A WIDER BLUEPRINT. RUSSIA'S AGAINST DIPLOMATIC BACKER. TURKISH PRESIDENT WILL SEEK NEW TREASURY AND FIND ITS MINISTER. HE IS A SUPPORTER -- HIS APPOINTMENT WILL SHORE UP MARKET CONFIDENCE. AS SET TO BE INSIDE OF TURKEYS ECONOMIC POLICIES IN THE NEW CABINET. HE WON REELECTION ON SUNDAY EXTENDING MORE THAN TWO DECADES IN POWER. AT LEAST NINE PEOPLE DIED IN CLASHES BETWEEN PROTESTERS AND POLICE AFTER THE MAIN OPPOSITION POLITICIAN WAS SENTENCED TO JAIL. THE GOVERNMENT RESTRICTED THE USE OF SOCIAL MEDIA PLATFORMS INCLUDING FACEBOOK, TWITTER, AND WHAT'S APP IN AN ATTEMPT TO PUT WATER TO UNREST. IN ADDITION TO HORMONAL THERAPY OR DISEASE-FREE AFTER THREE YEARS. THERE HAVE BEEN 87% OF THOSE GIVEN JUST HORMONAL THERAPY. THAT'S ACCORDING TO TRIAL RESULTS PRESENTED TODAY AT THE AMERICAN SOCIETY OF CLINICAL ONCOLOGY'S ANNUAL MEETING. GLOBAL NEWS 24 HOURS A DAY. POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I'M LISA MATEO AND THIS IS BLOOMBERG. ♪ >> I DO BELIEVE WE ARE CLOSE TO THE POINT WHERE WE CAN LET MONETARY POLICY DO ITS WORK. TO BRING INFLATION BACK TO THE TARGET. THE LONGEST PATH I PROJECT WE WILL SEE MODEST GROWTH THIS YEAR THE GDP COMING AND A LITTLE BIT BELOW 1%. JONATHAN: JUST DON'T CALL IT A PAUSE. IT'S A SKIP. A DECENT JOB OF EXPLAINING IT BECAUSE THIS PRICING AND CUTS, IT HEARD PAUSE, IT HURT CUTS. I THINK THEY FOUND AN ELEGANT WAY TO TARGET THAT ISSUE. LISA: THAT'S IMPORTANT. RIGHT NOW YOU ARE SEEING AN INCREASED PROBABILITY OF A JULY RATE HIKE EVEN THOUGH THERE IS A PAUSE OR A SKIP OR WHATEVER YOU WANT TO CALL IT. JONATHAN: DATA DEPENDENT, DEPENDENT ON WHAT DATA? TOM: TODAY'S DATA IN PARTICULAR. GOING TO BE DEPENDENT ON THE INFLATION REPORT COMING UP. JONATHAN: THE PAYROLL IS 13 MINUTES AWAY. PRICE ACTION GOING INTO IT ALL. FUTURES UP BY 0.4 PERCENT ON THE S&P 500. YIELD JUST A TOUCH HIGHER. BACK TO ABOUT 360 ON A 10-YEAR THIS MORNING. TOM: IF YOU'RE ACROSS THE HUDSON RIVER IN NEW JERSEY ON THE CLIFFS AND YOUR GOOD AT MATHEMATICS, YOUR POSSIBLY GOOD TO GO TO BROWN UNIVERSITY AND ESTABLISHING THE DEFINITIVE AMERICAN FINANCIAL ECONOMICS CAREER. FORMER GOVERNOR OF THE FED, HE IS A PROFESSOR AT THE UNIVERSE OF -- UNIVERSITY OF CHICAGO. I'M GOING TO CUT TO THE CHASE AND THIS GOES BACK TO A PAPER YOU WROTE A MILLION YEARS AGO. ON THINGS CAN CHANGE. THERE CAN BE A THEORY, THERE CAN BE A BELIEF AND THEN THINGS WILL CHANGE. WE HAD A PANDEMIC, A SERIES OF TOP REPORTS YOU'VE GIVEN THIS GREAT PERSPECTIVE. HOW IS THE LABOR ECONOMY CHANGING? >> WE TALKED A LOT ABOUT THE PARTICIPATION RATE BEING LOWER THAN IT HAD BEEN BEFORE ESPECIALLY FOR OLDER WORKERS SO I THINK THAT'S A LONG-TERM CHANGE BECAUSE OF THE HEALTH ISSUES AND HEALTH CONCERNS. WE'VE ALSO SEEN A SLOWER RETURN TO WORK FOR YOUNGER WORKERS. AND FOR THEIR RETURNING TO WORK, THEY'RE NOT RETURNING TO THE OFFICE. JONATHAN: ONE BIG CONVERSATION HOW MUCH OF THE INFORMATION WE LEARN TODAY CONTRIBUTES TO WHAT WILL SEE ON JUNE 13 AND CPI? HOW IMPORTANT IS THE CONTRIBUTION TO THE PRICE PRESSURE IN THIS ECONOMY? >> IT'S A VERY IMPORTANT PIECE BECAUSE LABOR IS SUCH AN IMPORTANT PIECE OF THE ECONOMY. IT'S AN IMPORTANT PIECE OF WHAT HAPPENS IN THE U.S. AND THAT'S PRIMARILY EXPENSE. IF PRICES ARE GOING UP AND WAGES ARE GOING UP IT'S GOING TO BE HARD FOR PRICES TO COME DOWN. LISA: WHAT DID WE LEARN OVER THE PAST SIX MONTHS? IS SINCE WE ARE AS MUCH IN A FOG AS WE WERE SIX MONTHS AGO. WHERE ARE WE IN TERMS OF THE READJUSTMENT FOR THE STICKINESS OF INFLATION, FOR THE ECONOMIC CYCLE? >> I THINK MOST PEOPLE KNEW IT WAS EASY FOR INFLATION TO GO UP RAPIDLY, IT'S HARDER FOR IT TO COME DOWN. IT CAME OFF ITS PEAK BUT NOW IT'S BOUNCING AROUND DEPENDING ON YOUR FAVORITE MEASURE. IT'S GOING TO BE MUCH MORE DIFFICULT FOR IT TO COME DOWN FROM THERE. I THINK WE KNEW THAT BEFOREHAND. THE CHALLENGE IS NO ONE EXPECTED THE LABOR MARKET TO CONTINUE TO BE AS STRONG AS IT IS NOW. EVEN THE MOST OPTIMISTIC PEOPLE DIDN'T THINK THAT. LISA: DO YOU THINK THAT'S OK TO BE ABLE TO DO THAT? THAT'S HONESTLY WHAT I KEEP WONDERING. DO WE THINK THAT'S GOING TO BE OK TO THE FEDERAL RESERVE? >> THAT'S WHAT THE HOPE IS. THAT'S THE IMMACULATE DISINFLATION. THAT SOMEONE CAN BRING DOWN THE INFLATION. I NEVER SAY NEVER ABOUT ANYTHING BUT I DON'T PUT A HIGH PROBABILITY ON IT. TOM: YOU WERE UP FRONT ON THAT. WE'LL TALK ABOUT THAT ANOTHER TIME. JOBS DAY TODAY IS SO IMPORTANT. THE DEFINITIVE FOR AN VOICE OF AMERICAN CAPITALISM SAID THE THING THAT IS SEPARATE FROM THIS COUNTRY IS THE CLEAR MARKETS. WE CLEAR MARKETS, WE MOVE ON. DO WE STATE AMERICAN EXCEPTIONALISM RIGHT NOW? THAT'S BEEN A THEME AROUND THIS DESK TODAY. WE CLEAR MARKETS AND A LOT OF PEOPLE ABROAD DON'T. >> I HOPE WE CONTINUE TO HAVE THAT. IT'S A CORE PART OF WHAT WE ARE IN THE U.S., A CORE PART OF FREE MARKETS. I'M GOING TO THE 300TH BIRTHDAY CELEBRATION OF ADAM SMITH'S BIRTH JUST IN A WEEK OR SO. IT'S GOING TO BE IN GLASGOW. JONATHAN: ARE WE STILL CLEARING MARKETS IN AMERICA? TOM: RELATIVE TO OTHER COUNTRIES. JONATHAN: THAT'S VERY IMPORTANT BECAUSE CERTAINLY IT USED TO BE THIS BIG CAPITALISM. TOM: CAN YOU COME EVERY DAY? THIS IS GREAT. >> SURE. JONATHAN: PAYROLLS, RANDY, WE ARE ON THE SAME PAGE. I THINK THEY'VE DONE A DECENT JOB. >> ALL RIGHT. JONATHAN: YOU DON'T HAVE TO FIGHT. THERE CAN BE AN ELEGANT WAY OF TACKLING THIS SUBJECT WHICH IS THE PAUSE WE ARE WAITING FOR THEM TO COMMUNICATE. WHAT IS -- WHAT DOES THE WORD SKIP INTO YOU? >> IT'S A TEMPORARY PAUSE. SO WE SKIP THIS MEETING BUT IT DOESN'T MEAN YOU ARE STAYING WHERE YOU ARE. JONATHAN: AND YOU'RE NOT PRE-COMMITTING TO A MOVE AFTER THAT? >> I THINK IT'S REALLY UNLIKELY THEY WILL BE CUTTING ANYTIME SOON. I THINK THEY WILL HANG TOUGH. IN MOST PEOPLE IN THE MARKETS HAVEN'T SEEN THEM HANG TOUGH. IT'S BEEN 25 YEARS SINCE THE FED HAS TRIED TO TAKE THE PUNCH BOWL AWAY. THEY ARE REALLY COMMITTED TO THAT. I KNOW MOST PEOPLE HAVEN'T EVEN HEARD OF A VULGAR -- OF FOLK ARE -- THAT'S WHY THEY KEEP INVOKING HIM BECAUSE IT WAS TOUGH WHEN HE WAS THERE AND HE WAS HANGING REALLY TOUGH. THE UNEMPLOYMENT RATE WENT REALLY HIGH AND THEY ARE TRYING TO AVOID THAT EXTREME. LISA: HAVE WE GOTTEN CLOSER TO THE CHANCE OF A PAINLESS SORT OF DISINFLATION THAT A LOT OF PEOPLE TALKED ABOUT HER HAVE WE GOTTEN FURTHER AWAY? >> LABOR MARKET IS STILL IS STRONG. THE CHALLENGES IF YOU LOOK AT CORE EXPENDITURE INDEX THAT TICKED UP AND THAT'S REALLY MUCH MORE PREDICTIVE OF THE HEADLINE NUMBERS. THE FED IS GOING TO BE CONCERNED ABOUT THAT. THE STRENGTH IN THE LABOR MARKET IS GOING TO MAKE IT MORE DIFFICULT FOR INFLATION TO COME DOWN. LISA: WHAT DO YOU MAKE OF THE HOUSE IN MARKET RIGHT NOW? A LOT OF PEOPLE HAVE BEEN LOOKING AT IT WITH GROWING CONCERN. IS THAT KIND OF A TIPPING POINT, NONLINEAR KIND OF DEVELOPMENT THAT COULD REALLY CHALLENGE THIS? >> RIGHT NOW THE RESIDUAL HOUSING MARKET IS OK. THERE IS VERY LITTLE SUPPLY COMING ON BECAUSE BUT HE WANTS TO GIVE UP THEIR TWO OR 3% BUT IF THE UNEMPLOYMENT RATE GOES UP THEN THEY'RE GOING TO HAVE TO MOVE. SUDDENLY THERE WILL BE A LOT OF SUPPLY COMING ON AND SHE PRICES DOWN. COMMERCIAL REAL ESTATE IS IN A REALLY DIFFICULT POSITION. PEOPLE ARE NOT GOING BACK TO THE OFFICE, CAPITALIZATION RATES ARE GOING TO BE DOUBLY WHAT THEY WERE BEFORE AND THEY DON'T HAVE 30 YEAR FIXED-RATE MORTGAGES. SO THEY'VE GOT 1 TRILLION AND A HALF OF COMMERCIAL REAL ESTATE THAT'S UP FOR REFINANCING IN THE NEXT COUPLE OF YEARS. JONATHAN: WE ALL WISH WE HAD A 30 YEAR FIXED WITH A 2.5%. GO BACK IN TIME AND LINE UP OUTSIDE FIRST REPUBLIC. LISA: DON'T PAY FOR 10 YEARS. TOM: WE COULD GO TO THE ADAM SMITH IS IN SCHOOL. THEY HAVE THE 300 YEAR ANNIVERSARY THEY HAVE A SPECIAL SCOTTISH PLAID. >> YOU WERE KILTS TO THE DINNER. TOM: SERIOUSLY, ALL THE HEAVYWEIGHTS ARE GOING TO BE THERE. WE CAN DO THE SHOW FROM THERE. JONATHAN: I WANTED TO GET TO MIKE MCKEE FOR A QUICK WORD BUT GIVEN THE IMPORTANCE OF THIS CONVERSATION MAY BE READ DON'T HAVE TIME. WHAT ARE YOU LOOKING FOR IN ABOUT FIVE MINUTES? >> I'M LOOKING FOR ANDY IN A KILT. >> IF YOU ARE LEANING ANY WHICH WAY YOU ARE PROBABLY LEANING TOWARDS IS SLIGHTLY STRONGER JOBS ARE BECAUSE WE HAD 13 MONTHS IN A ROW WHERE IT HAS BEATEN THE CONSENSUS AND AS YOU HEARD EARLIER IT'S A MONTH WITH A SEASONAL ADJUSTMENT PROBLEM BUT IT COULD BRING IT DOWN THE WHISPER NUMBER ON WALL STREET, 225 AREA SEEMS LIKE MOST PEOPLE OUT THERE WHO ARE WATCHING TODAY IF THEY'RE NOT TRYING ON THEIR KILTS ARE BETTING WITH THE SORT OF MOMENTUM TRADE FOR A 14TH MONTH IN A ROPE. JONATHAN: EVERY DAY I COME IN HERE THINKING THIS IS A SERIOUS PROGRAM. JONATHAN: FOR THE FIRST FIVE MINUTES OF MY MORNING IT'S GOING TO BE A SERIOUS DAY. THE PAYROLLS REPORTS, FIVE MINUTES AWAY. YOUR ESTIMATE THIS MORNING, 195,000. JONATHAN: LET'S CALL IT 22 SECONDS AWAY FROM THE PAYROLLS REPORT. EQUITY MARKET FUTURES ARE POSITIVE ON THE S&P 500 BY 0.4%. YIELDS ON A TENURE HIGHER BY A COUPLE OF BASIS POINTS. LET'S CALL IT 3.61. THE NUMBER PER LOOKING FOR, 195,000 FOR THE JOBS NUMBER LET'S GET TO MIKE MCKEE. MIKE: THIS IS ONE FOR THE HAWKS IF YOU WERE THINKING THE FED MIGHT NOT RAISE RATES, 330 9000 JOBS CREATED DURING THE MONTH. THE PRIOR MONTH WAS IT 253 UNREVISED WE WILL SEE WHAT THAT LOOKS LIKE IN JUST A MOMENT. THE UNEMPLOYMENT RATE DOES JUMP UP TO 3.7% FROM 3.4% SO THERE'S A GOOD QUESTION FOR RANDY. WHICH ONE IS THE FED GOING TO LOOK AT MORE CLOSELY? HOURLY EARNINGS CAME IN EXACTLY AS EXPECTED. THE YEAR-OVER-YEAR GOES TO 4.3%. THAT IS A TICKLER WITHIN THE FED EXPECTED AND THE CONSENSUS EXPECTED. AVERAGE WEEKLY HOURS 34.3, THAT IS DOWN A LITTLE BIT FROM THE PRIOR MONTH AND THE LABOR FORCE DOESN'T CHANGE, 62.6. TOTAL REVISIONS A PLUS. I WILL GET YOU THE BREAKDOWN OF WHAT THOSE MONTHS CAME FROM. IF YOU'RE THE FED AND THINKING THAT THE LABOR MARKET IS GOING TO SLOW DOWN, YOU'RE GOING TO BE DISAPPOINTED IN THAT NUMBER. JONATHAN: SOMETHING FOR EVERYONE IN THIS. THE INITIAL DEBATE AROUND THIS TABLE WILL BE 339 SCREAMS LET'S GO AGAIN IN JUNE AND HIKE ONCE MORE. THE REPORT THIS MORNING, LESS CONVINCING AND WE CAN TALK ABOUT THAT IN A SECOND. LET'S MOVE THIS TO THE FRONT END OF THE YIELD CURVE. 10-YEAR GILTS HIGHER BY FOUR BASIS POINTS. CLEARLY THAT MOVE IN PAYROLLS AND HEADLINE NUMBERS SHAPING THINGS. I SAY THIS ALMOST EVERY SINGLE MONTH LET'S SEE IF THAT MOVE STICKS. EQUITY FEATURES NOT REALLY DOING MUCH THE S&P 500 POSITIVE BY LET'S CALL IT 0.4%. JUST A TURN TO FOREIGN EXCHANGE THE BACK OF THE HIGH-HEELEDS -- HHIGH YIELDS. I'VE HAD A BIT MORE TIME TO PULL THROUGH THIS ONE. I THINK PEOPLE MIGHT HAVE THE SAME QUESTION. THE HEADLINE NUMBER IS MASSIVE. WHAT'S HAPPENING WITH WAGE GROWTH? >> TAKING A LOOK AT THE UNEMPLOYMENT RATE, THE NUMBER OF UNEMPLOYED ROSE BY 440,000. AND THE LABOR FORCE GREW ONLY BY 130,000 SO THIS IS DEFINITELY A STORY OF MORE PEOPLE LOSING JOBS THAN GETTING JOBS WHICH IS A DIFFERENT STORY FROM WHAT WE HAD SEEN IN THE UNEMPLOYMENT RATE OVER THE LAST COUPLE OF MONTHS. WE DO HAVE THAT GIGANTIC JOB CREATION NUMBER AND A LOT OF THAT IS ACCORDING TO THE BLS. PROFESSIONAL AND BUSINESS SERVICES, 64,000 JOBS. THAT WAS AN AREA THE FED AND OTHERS HAD BEEN LOOKING AT. WHEN YOU START TO SEE HIRING SLOWDOWN IT'S USUALLY IN THE TEMPORARY HELP SERVICES. THOSE HAD BEEN SLOWING DOWN BUT NOW WE GET A REBOUND. GOVERNMENT EMPLOYMENT UP 60,000 SO THAT WAS A BIG CONTRIBUTOR AND AS USUAL HEALTH AND LEISURE AND HOSPITALITY ARE ADDING A LOT TO THE LEVEL. CONSTRUCTION INTERESTINGLY ENOUGH, 25,000 JOBS WHICH WE HAD SEEN IN THE REPORT THIS WEEK THAT THERE WERE A LOT OF OPEN JOBS IN CONSTRUCTION. WE ARE STILL SEEING HOMEBUILDERS PUTTING TOGETHER A LOT OF WORK. IT LOOKS AT THIS POINT THAT MANUFACTURING BY THE WAY LOST 2000 JOBS. IT LOOKS LIKE STILL STRONG JOB CREATION BUT WE ARE SEEING SOME OF THE NUMBERS IN TERMS OF HOUSEHOLD TICK UP. TOM: I'M LOOKING AT THE 400,000 PLUS, MY FIRST MAP ON IT I REALLY HAVE TO BE CAREFUL. 283,000 THREE MONTH MOVING AVERAGE. JONATHAN: HOW DO YOU INTERPRET THESE NUMBERS? 339, BIG. IF YOU TAKE THAT AWAY AND LOOK AT THE REST OF THE REPORT WHAT DO YOU SAY JUNE IS GOING TO BE? LISA: I REALLY CAN'T UNDERSTAND THESE NUMBERS BUT THE NUMBERS DON'T TELL A COHESIVE STORY. WHAT YOU'RE SAYING IS GREATER THAN EXPECTED HIRING AND YET A WEAKNESS THAT SPEAKS TO THE INCREASED LAYOFFS WE SEE ANECDOTALLY. ISN'T NECESSARILY POSITIVE THE FACT THAT THERE IS NOT AS GREAT OF A WAGE INCREASE ON A YEAR-OVER-YEAR BASIS SPEAKS TO A LACK OF MOMENTUM THERE. THE FED IS GOING TO LEAN INTO I DON'T UNDERSTAND HOW WE CAN GET THESE UPWARD REVISIONS, HOW WE CAN GET ONE BLOCKBUSTER NUMBER AFTER ANOTHER AND CALL THIS A WEAK ECONOMY. JONATHAN: LEANING INTO THE HEADLINE NUMBER BIG YIELDS UP STRONGER EQUITIES PUT IN BUT AS WE HAVE MORE OF A CONVERSATION ABOUT THE REST OF THE REPORT I CAN TELL YOU WITH THE FRONT AND NOW A HIGH OF ABOUT FOUR BASIS POINTS. IT CHANGES SO OFTEN YOU GET THE INITIAL REPORT, THE MARKET REACTION AND THEN IT FADES AS THE SESSION GROWS A LITTLE BIT OLDER. EQUITY MARKETS ON THE S&P 500 ALMOST A SESSION HIGH POSITIVE BY 0.5, 0.6%. WONDERFUL TO CATCH UP WITH YOU. WE WILL CATCH UP WITH MIKE A LITTLE BIT LATER AS WE CAN'T BE DONE TO THE OPEN AS WELL. FANTASTIC LINEUP TO GO THROUGH THESE NUMBERS. JUST TO BREAK DOWN WHAT WE'VE HEARD IN THE LAST FIVE MINUTES OR SO PUSHING THROUGH THIS MARKET AND TALKING ABOUT CPI ON THE 30. TOM: IT'S A TERRIFIC JOBS REPORT. IT WILL BE INTERESTING TO SEE WHAT YOUR TEAM SAYS THAT 9:00 AS WELL. RANDALL KRASNER FORMER FED GOVERNOR. LISA CAPTURED IT BEAUTIFULLY, CONFUSION WE HAVE THE MOVABLE PARTS OF LABOR ECONOMICS TEST BOOK WHICH MOVABLE PART OF THE AMERICAN LABOR ECONOMY MATTERS TO YOU RIGHT NOW? >> PROBABLY THE PIECE THAT MATTERS THE MOST IS WHAT IS HAPPENING WITH WAGES. THAT, THE FED CAN TAKE A LITTLE BIT OF COMFORT IN THAT DESPITE THE VERY STRONG NUMBERS THAT WE SAW WE ARE NOT SEEING IN INTENSIFYING WAGE PRESSURE BUT THAT'S GOING TO BE REALLY THE KEY BECAUSE THAT'S WHAT FEEDS THROUGH TWO COST OF SERVICES AND CPI, PC, FOR THE IMPLICATIONS FOR INFLATION'S GOING I'M -- IN COST-OF-LIVING. LISA: THIS IS MESSY DATA. IT'S NOT JUST WITH RESPECT TO HEADLINE NUMBERS. WHICH JOBS ARE BEING ADDED? ARE THEY LOWER INCOME JOBS? AND WHAT DOES THAT SAY ABOUT WAGE GAINS? DOES THAT GIVE YOU AN APPLES TO APPLES COMPARISON? THAT'S WHY DATA DEPENDENCY IS LESS IMPORTANT. THE DATA IS TO MESSY TO READ. >> IT'S REALLY IMPORTANT TO UNPACK THOSE NUMBERS AND LOOK AT THE COMPOSITION. WHERE ARE THE LAYOFFS HAPPENING? AT THE LOWER END OF THE SPECTRUM OR THE INCOME SPECTRUM IT MAKES A BIG DIFFERENCE FOR WHAT AVERAGE WAGE GROWTH IS GOING TO BE. UNDOUBTEDLY THAT'S WHAT THE PEOPLE IN THE FED WILL BE DOING BUT WE'LL SEE. I THINK MY GUESS IS IT WILL BE CONSISTENT WITH A SKIP. YOU KNOW, ONE NEVER KNOWS. TOM: WE CONTINUE HERE IN A MOMENT. A LIFT TO THE EQUITY MARKETS WHERE WE WERE BEFORE THE REPORT. THE VIX IS STUNNING. A 14 WILL BE EXTRAORDINARY. OIL WITH A BIT OF A RALLY FROM THE CHOPS REPORT. OF DOLLAR WEAKNESS THIS MORNING I WANT TO GO NARROW ON YOU AND I DO THIS BECAUSE YOU'RE SO GOOD AT THIS. THERE'S BEEN ANGST OVER THE LAST 10 DAYS ABOUT THE REVISIONS THAT MIKE MCKEE TALKS ABOUT. NOBODY TRUSTS JACK WELCH OF GE THERE'S A THING THE BIRTH DEATH ADJUSTMENT TO ALL OF THE STATISTICS. EXPLAIN HOW EXPERTS LIKE YOU ARE NOT WORRIED OR DON'T HAVE THE ANGST THAT WE HAVE IN THE BIRTH DEATH STUDY. >> STEPPING BACK, BIGGER PICTURE I DON'T THINK THESE NUMBERS ARE POLITICIZED. IT AIN'T EASY EVERY MONTH TRYING TO COME UP WITH THE TOTAL NUMBER OF WORKERS AND SO YOU HAVE THESE CHALLENGES OF WHAT OUR NEW FIRMS COMING IN, WHAT ARE FIRMS THAT ARE EXITING, HOW WELL DO YOU COVER THOSE AND THAT'S ONE OF THE ISSUES THAT COMES UP THERE'S A LOT OF CHURN. YOU CAN GET SOME OF THIS VOLATILITY. LISA: LET'S TAKE A STEP BACK WITH THE UPWARD REVISIONS CAN WE MAKE AN ASSUMPTION THAT PERHAPS THERE SHOULD BE AN INCREASE PRICING OF IT FOR THE RATE HIKES DOWN THE LINE PERHAPS CITIGROUP'S TO SOME OF THE PEOPLE WHO ARE SAYING THEY ARE GOING -- THERE ARE GOING TO BE RATE CUTS STARTING IN SEPTEMBER. >> I DON'T SEE RATE CUTS SEEING ANY TIME SOON. FOR THAT, THE FED IS GOING TO HANG TOUGH. DO YOU REMEMBER WHAT HAPPENED TO THE FED IN THE LATE 1870'S, EARLY 80'S? THE FED PULLED BACK TOO QUICKLY, INFLATION WENT BACK UP AND THEY HAD TO RAISE TO DOUBLE-DIGIT LEVELS. THEY WOULD RATHER MOVE THINGS UP TO UPPER FIVE THEN TAKE A LONG PAUSE AND HAVE TO GO TO EIGHT OR 10. LISA: HOW LONG WILL IT TAKE FOR A CUT? >> UNLESS THERE IS AMERICA WHERE WE GET THIS IMMACULATE DISINFLATION AND IT FALLS LIKE A STUNT WHICH I SEE NO EVIDENCE FOR THEIR NOT GOING TO BE CUTTING ANYTIME SOON. TOM: WE'RE NOT GOING TO SHOW UP TODAY WITH ANY MOVING PARTS BUT IF YOU LOOK AT THE STANDARD DEVIATION OF AMERICAN UNEMPLOYMENT, 3.7% IS STILL AN ACT OF GOD. MICHAEL MCKEE HAS PARSED THROUGH ALL OF THE DATA. WE ARE STILL IN THE POST-PANDEMIC TREND. WHAT'S A LEVEL OF UNEMPLOYMENT WHERE WE BEGIN TO CHANGE THIS DIALOGUE? >> I THINK MOST PEOPLE SAY YOU HAVE TO AT LEAST GET OVER FOR. THAT'S WHAT THEY CONSIDER THE NEUTRAL RATE FOR SOME TIME. EVEN AT 4%, THAT SLOWER THAN IT WAS A COUPLE OF YEARS AGO IN TERM OF WHAT A NEUTRAL RATE WOULD BE. INTERESTING DECOMPOSITION OF THE UNEMPLOYMENT RATE, WE HAD SEEN A LOT MADE OF THE FACT THAT BLACK UNEMPLOYMENT HAD FALLEN TO THE LOWEST EVER. IT HAS JUMPED UP SIGNIFICANTLY ALMOST A FULL PERCENTAGE POINT. THEN IT WAS IN THE LAST REPORT. AT THIS POINT, WE ARE LOOKING AT 5.6%. SO A BIG INCREASE IN BLACK AND AFRICAN-AMERICAN EMPLOYMENT, UNEMPLOYMENT. WHICH IS NOT NECESSARILY A GOOD THING. TOM: MARKETS ON THE MOVE, GETTING READY FOR THE NEXT HOUR. COMING UP IRA JERSEY WILL JOIN US. LIFTING EQUITIES TO THE MOON. SHE IS SET TO PARTICIPATE IN STOCKS AND JEFF ROSENBERG HAS SAID ALL OF THIS TOGETHER. I'M GOING TO ASK YOU A QUESTION WHICH I'M SURE CARNEGIE MELLON, YOU KNOW CARNEGIE MELLON . I'M GOING TO ASK ABOUT THE BOMBSHELL FROM JOHN WILLIAMS A COUPLE DAYS AGO. I BELIEVE SIGNIFICANTLY -- SIGNALS A SHIFT LOWER IN INTEREST RATES. ARE YOU INVESTING PURSUING BLOOMBERG YIELD, HIGHER FIXED INCOME PRICE? >> IT'S REALLY BEEN A STORY OF QUITE THE OPPOSITE. TOM: I THINK WE HAVE A FROZEN JEFF ROSENBERG. >> I'M STILL HERE. THE PRODUCER WAS IN MY EAR FOR A SECOND. IT'S BEEN GOING IN THE OPPOSITE DIRECTION. IT'S ABOUT HIGHER INTEREST RATES. WE'VE BEEN INVESTING ALONG THAT WAY AS WE TALKED IN TERMS OF THE CURVE. WE ARE FACING AN INVERTED YIELD CURVE. THE LONG-TERM STORY IS REALLY ABOUT WHETHER OR NOT POLICY IS TIGHT RIGHT NOW. IF OUR STAR IS LAID OUT THEN POLICY IS TIGHT. THAT'S WHAT THE FED BELIEVES AND THAT'S WHY THEY ARE TAKING A PAUSE. WHAT TODAY'S LABOR MARKET REPORT SAYS IS WHERE IS THE TIGHTNESS? YOU'VE RAISED INTEREST RATES 500 BASIS POINTS AND WE ARE STILL DELIVERING OVER 300,000 JOBS. SO THE DISCONNECT HERE IS YOU ARE NOT SEEING THE SLOWING IN THE LABOR MARKET. WHERE YOU ARE SEEING THE SLOWING IS IN THE GOODS PRODUCING PART OF THE ECONOMY AND THE SPLIT IS GOODS AND SURVEY-BASED DATA ON GOODS IS THAT RECESSION TYPE LEVELS. SERVICES ARE HOLDING JUST FINE. RANDY SAID EARLIER YOU HAVE TO LOOK AT THE DETAILS. ONE OF THE DETAILS THAT STICKS OUT IS TURNAROUND IN THE GOODS PRODUCING AREA OF THE ECONOMY IN TERMS OF HIRING. THAT'S A LITTLE BIT WORRISOME FOR THE FED BECAUSE ALL THE DISINFLATION COMING FROM THE GOODS. IF GOODS PRICES ARE STABILIZING AND GOODS HIRING IS INCREASING WHICH IS WHAT WE SEE IN THIS REPORT THEN YOU MAY HAVE THE CONSENSUS OUTLOOK HERE WHICH IS FOCUSED ON THESE SURVEYS, THE PMI'S, YOU KNOW COLLAPSING INTO RECESSION LEVELS THAT MAY JUST BE A NOMINAL EFFECT. IT'S REALLY NOT TELLING YOU THE STORY AND FOR THE FED, YEAH, IT'S A PAUSE. OR A SKIP, SORRY. A COUPLE OF MORE STRONG REPORTS AND IT MAY NOT BE THAT THE RATES AND THE REAL RATE IS AS LOW AS WILLIAMS INC. SAID IS BECAUSE YOU'RE NOT GETTING THE AFFECTED TIGHTENING. LISA: I KEEP WONDERING IF PEOPLE HAVE GOTTEN TOO SANGUINE ON THE IDEA OF INFLATION COMING BACK TO THE 2% OF ALL. I'M LOOKING RIGHT NOW AT BREAK EVEN RATES. 2.2% OVER THE NEXT FIVE TO 10 YEARS. A HOT LABOR MARKET REPORT DOES IT SUGGEST TO SEEK IT IS -- STICKINESS NOT PRICED INTO THIS MARKET? >> IT'S CERTAINLY NOT PRICED INTO THE BREAKEVENS. THEY ARE REFLECTING THE IMMACULATE DISINFLATION AND, YEAH, THE EVIDENCE HASN'T SHOWN ANYTHING TO SUPPORT THE IMMACULATE DISINFLATION. THE HOPE THAT INFLATION, FALLS AND THEN THE SECOND IMPLICATION OF THAT AS THE FED IS GOING TO BE ABLE TO GO BACK TO HIS OLD PLAYBOOK AND RIGHT TO THE RESCUE OF ASSET PRICES AND ASSET INFLATION. AND CUT INTEREST RATES BY THE END OF THIS YEAR, WHICH AGAIN YOU JUST DON'T SEE ANYTHING IN THE DATA THAT SUPPORTS THAT. I THINK THIS REPORT IS A LITTLE CHALLENGING. IT HELPS A BIT BUT IT'S A NOISY DATA SERIES AND SO WE WILL HAVE TO SEE THERE. TOM: WE WILL GET TO IRA JERSEY, THE STOCK MARKET THAT WON'T QUIT, PROFESSOR I WANT TO GO BACK TO THE ADVENT OF THE CHICAGO SCHOOL AND IT CAME OUT OF SOMETHING I GOT TOTALLY WRONG WHICH IS MY GRANDMOTHER TALKING ABOUT THE PANDEMIC OF 1918. WE USED TO LAUGH AT GRANDMA. EVERYBODY ELSE WHO'D HAD TO LIVE THAT PANDEMIC WE ARE COMING OUT OF OUR OWN PANDEMIC NOW. CAN YOU PRACTICE THE PEOPLE TRADE OF LABOR ECONOMICS NOW OR IS IT JUST TOO MUCH UNCERTAINTY? SURPRISE AFTER SURPRISE AFTER SURPRISE. DO WE REALLY KNOW WHAT WE'RE DOING? >> OBVIOUSLY, WE DON'T HAVE PANDEMICS ALL THAT OFTEN. YOU HAVE TWO MAIN DATA POINTS. IT'S HARD TO MAKE SURE THAT YOU'VE GOT YOUR MODELS WELL CALIBRATED. I THINK WE SEE GENERAL CHARACTERISTICS THAT MAKE SENSE. YOU'RE GOING TO SEE RELUCTANCE OF PEOPLE GOING BACK TO THE OFFICE SO I THINK THOSE THINGS ARE BROADLY PREDICTABLE. THE STRENGTH THAT WE ARE CONTINUING 4, 500 BASIS POINT INCH INCREASED BY THE FED, THAT'S PRETTY SURPRISING. TOM: FRAME WITH YOUR FIXED INCOME VIEW JEFF ROSENBERG, THE DISTANCE FROM GOLD'S BEAUTIFUL HER. IT NOW, IT SEEMS EXTRAORDINARY. >> THERE IS A LONG WAY TO GO HERE AND AS RANDY JUST ECHOED 500 BASIS POINTS IS A BIG INCREASE. THERE IS THE OTHER SCHOOL OF THOUGHT ON THIS REAL INTEREST RATE THAT THE PANDEMIC ASSURED IN SOME SIGNIFICANT STRUCTURAL CHANGES THAT RAISES THE REAL INTEREST RATE. IF IT IS ACTUALLY HIGHER THAN THE NOMINAL INTEREST RATE HAS TO BE HIGHER IN ORDER TO GET TIGHTENING. WE JUST HAVE TO BE IN THIS PERIOD OF UNCERTAINTY AND IT MAY BE LONG AND IT'S JUST AROUND THE CORNER AND LABOR MARKETS CAN CHANGE VERY QUICKLY. WE CAN GET INTO NEGATIVE NUMBERS ON THE HEADLINE PAYROLLS AND THEN THE FED WILL BE JUSTIFIED IN THE SKIP. BUT THE LACK OF MOMENTUM, THE LACK OF EVIDENCE ON MAKING ANY OF THAT PROGRESS IN THE LONGER THAT PROCEEDS THAT STARTS TO PUSH ON THE OTHER ARGUMENT THAT YOU REALLY HAVE CUT A STRUCTURAL CHANGE. THERE IS LESS INTEREST RATE SENSITIVITY. THE OTHER BIG THING HERE IS THE BALANCE SHEET AND LIQUIDITY. PERHAPS WE WILL LOOK BACK ON THIS AND RECOGNIZE THAT IT WASN'T ABOUT THE INTEREST RATE IT WAS JUST THAT YOU HAD THIS LEGACY OF EXCESS LIQUIDITY THAT YOU HAD TO WAIT TO GET THE LIQUIDITY OUT BEFORE THOSE INTEREST RATES STARTED TO REALLY BITE. AND IF YOU WAITED TOO LONG, PERHAPS THAT ALLOWED INFLATION AND INFLATION PSYCHOLOGY TO TAKE HOLD AND THAT WOULD BE PER WE GO. BUT THAT'S JUST ONE CENTRAL PATH. LISA: GIVEN THE UNCERTAINTY AND THE INABILITY TO GET AN EDGE ON DATA THAT'S MOVING QUICKLY AND THAT REALLY HAS TO FIGHT A LOT OF EXPECTATIONS WHAT ARE YOU PUSHING PAST AGAINST? GIVEN THAT THERE ARE SO MANY QUESTION MARKS AROUND THESE BIG PARAMETERS. THERE'S VERY LITTLE CONVICTION. IF YOU TAKE THIS CONSENSUS, 65%, 70% PROBABILITY OF RECESSION IN THE NEXT 12 MONTHS IT'S PROCESSION IS THE CONSISTENT -- CONSENSUS. YOU LOOK AT A REPORT LIKE TODAY, MARKETS ARE HOLDING UP IN TERMS OF DATA AND RETURNS. THERE IS BIG AI AND TECH AND WE ARE BACK IN TWO TECH DOMINATING SEVEN STOCKS BUT THERE'S NOT A LOT OF RECESSION RISK PRICED INTO THE FINANCIAL MARKET. LOOK AT CREDIT MARKETS AND CREDIT SPREADS. IF YOU'RE GOING TO PUSH BACK ANYWHERE I THINK THE PUSHBACK IS THIS KIND OF 70% CONSENSUS PROBABILITY AROUND THE CORNER. IT'S NOT JUST RIGHT AROUND THE CORNER. IT'S PUSHED OUT FURTHER AND FURTHER. IT'S THE LONG AND VARIABLE LAGS SO THAT THE TIME DIMENSION IS THE THING YOU PUSH AGAIN. TOM: 10 BASIS POINTS, 4.44%. PROFESSOR THAT'S JEFF ROSENBERG. HEARING FROM YOU THROUGH THE MONTH OF JUNE. IRA JERSEY IS GOING TO GO BACK WITH BLOOMBERG INTELLIGENCE AND WRITE UP THIS IMPORTANT NOTE FOR TERMINAL USERS WORLDWIDE. WERE GOING TO JUMP TO THE EQUITY MARKETS RIGHT NOW. I SORT OF SET THIS ON AIR BUT I SAID IT MUCH MORE OFFER TODAY. ARE WE ON THE CURSOR OF A MELT UP WHICH IS BASICALLY DUE TO OBVIOUS SHORT COVERINGS AND FAR MORE JUST A GENERAL CAUTION OUT THERE? >> I THINK YOU HIT THE NAIL ON THE HEAD, TOM. IT'S HAPPENING AS EVERYONE WAS EXPECTING A RECESSION AS OF LATE LAST YEAR WE WERE PRICING ON MATERIAL RECESSION EMERGING BOTH IN THE ECONOMY AND EARNINGS STREAM. ALL THAT DATA HAS SURPRISED US TO THE UPSIDE INCLUDING WITHIN THE S&P 500 RESULTS. WE ARE EXPECTING MANY COMPANIES STARTED BEATING EXPECTATIONS. I THINK WHAT WE'RE SEEING RIGHT NOW IS THE EFFECT OF SLOWER INFLATION STARTING TO PROVE OUT AS MARGIN STABILITY AND THE S&P 500 AND THAT'S ACTUALLY BRIGHTENING THE OUTLOOK FOR EARNINGS EVEN WHILE MOST OF THE NARRATIVE IS STILL SURROUNDING THIS ECONOMIC RECESSION THAT WE'VE ALL BEEN WAITING FOR. THE EARNINGS STREAM AS SHOWING THAT THE S&P 500 IS ABOUT TO GO THROUGH SOME FORM OF A HEALING PROCESS. THAT CREATES A LOT OF MOVING PARTS. A PC SOME STOCKS CELEBRATING BUT THEN THE EARNINGS STREAM AS WELL AS HOPES FOR BETTER EARNINGS GOING FORWARD OTHER STOCKS STILL STRUGGLING WITH THE ECONOMIC WEAKNESSES. BUT IT IS A LOT OF MOVING PARTS. I THINK THE RESULT IS WE WERE EXPECTING A VERY BIG DRAWDOWN. WERE NOT GETTING IT. LISA: THE BETTER THAN EXPECTED EARNINGS ARE YOU SEEING THAT COMPANY WITH MORE JOB CUTS OR IS THIS ACTUALLY ENCOURAGING MORE HIRING THAT FLIES IN THE FACE OF AN UNEMPLOYMENT RATE? >> I THINK THAT'S AN EXCELLENT QUESTION. THE PEAK JOB CUTS OCCURRED IN THE FOURTH QUARTER OF 2022. WHEN WE LOOK AT SENTIMENT TOWARDS LABOR AND BALANCES WE ACTUALLY SEE S&P 500 COMPANIES TALKING ABOUT LABOR AND BALANCES NOW NOT AS MUCH AS OVEN IMPEDIMENT TO GROWTH GOING FORWARD. IF YOU LOOK AT ACTUAL JOB CUTS ANNOUNCEMENTS AND INITIAL CLAIMS THAT RESULTED FROM THOSE TOP CUT ANNOUNCEMENT WE SAW JOB CUTS ANNOUNCEMENTS PEAK IN THE FOURTH QUARTER AND EARLY FIRST QUARTER. THEY STARTED TO TREND DOWN SLIGHTLY. WE SAW INITIAL CLAIMS WITH A PEEK OVER THE MARCH APRIL PERIOD AND THEY STARTED TO DOWNTREND OF LITTLE BIT. EXPERIENCE IN THE S&P REALLY FOCUSED ON THE TECH SECTOR LAYOFFS AND COMMUNICATION SECTOR LAYOFFS. SOME ADDITIONAL FINANCIAL SECTOR LAYOFFS. THE GROUPS THAT WERE EXCESSIVELY EMPLOYED AS A RESULT OF PANDEMIC CONDITIONS HAVE NOW LAID OFF WORKERS AND THEY ARE TELLING US THAT THEIR CONDITIONS ARE IMPROVING. GOING FORWARD THEY FEEL LIKE THEY GENERALLY RIGHT SIZED THE LABOR FORCE IN PARTICULAR IN TECH AND COMMUNICATIONS. THOSE GROOVES ARE TELLING AS THAT THEY RIGHT SIZE OUR LABOR FORCE. THE FEELING A LITTLE BIT BETTER OF THEIR DEMAND AND THEY HAVE A MORE STABLE ENVIRONMENT FOR 2023 RELATIVE TO 2024. LISA: THIS DOESN'T SOUND LIKE A MACULA DISINFLATION. THIS DOESN'T SOUND LIKE WHAT THE FED WANTS TO SEE EVEN THE PEOPLE ARE KIND OF QUESTIONING THAT A LITTLE BIT MORE AFTER GETTING SOME OF THESE NUMBERS. DO YOU THINK PEOPLE HAVE WRITTEN OFF THIS IDEA OF INFLATION BEING STICKIER? I KNOW YOU'RE SAYING THEY'RE GOING TO HOLD RATES HIGHER BUT WE HAVEN'T SEEN THE PAIN AND THEY'RE ALREADY TALKING ABOUT THE BALANCE OF RISKS TO THE DOWNSIDE AND YOU'RE NOT SEEING IT IN THE ECONOMIC DATA. ARE YOU CONCERNED THIS BET IS NOT TAKING THE LONGER-TERM RISK OF INFLATION SERIOUSLY ENOUGH? >> I THINK THEY ARE. I THINK THAT'S WHY THEY RAISED RATES SO RAPIDLY AND SUCH BIG STEPS. I THINK TAKING SOME TIME TO ASSESS GIVEN THE LONG AND VARIABLE LAGS, THAT SEEMS PERFECTLY REASONABLE BUT THEY MADE IT VERY CLEAR THAT JUST BY SKIPPING OR TAKING A SHORT BREAK DOESN'T MEAN THEY'RE GOING TO BE CUTTING. LISA: DO YOU THINK THEY COULD GET TO 6%? >> FOR SURE. IF INFLATION CONTINUES TO BE AS PERSISTENT AS IT IS WE SAW THE CORE AND THE HEADLINE FOR THE EXPENDITURE INDEX. THAT TICKED UP, IT DIDN'T TAKE DOWN. SO IT BROUGHT DOWN A LOT FROM ITS PEAKS. IF WERE NOT MAKING PROGRESS THE FED IS GOING TO HAVE TO KEEP AT IT. TOM: GINA I HAVE ONE QUESTION WHAT IS TECH FINALLY BREAK? >> WHEN YOU LOOK AT THE SEQUENCE OF WHAT'S HAPPENED SO FAR THIS YEAR IT'S NOT JUST ABOUT TECH. TOM: THANK YOU. >> IT REALLY IS AN ACCUMULATION OF GROWTH STOCKS RECOVERING AFTER LAST YEAR'S WEAKNESS. IT'S TECH, COMMUNICATIONS, CONSUMER DISCRETIONARY ALL THREE OF THOSE FACTORS HAVE LED THE CHARGE SO FAR THIS YEAR. THERE IS A HEAVY, HIGHER CONCENTRATION BUT THERE IS REALITY OF WHAT'S GOING ON IN THE S&P 500. WHEN THE WINNERS HAVE BECOME -- IT'S VERY CONSISTENT WITH WHAT WERE SEEING IN THE EARNINGS TREND. TOM: THANK YOU SO MUCH. IRA, SO SORRY WE COULDN'T GET TO YOU TODAY. I WANT TO CAN ONE IN HERE. THERE ARE PEOPLE THAT SAY THIS CHAIRMAN HAS FAILED AND HE SHOULD GO. DEFENDANT JEROME POWELL. >> ALL CENTRAL BANKS AROUND THE WORLD WERE TOO SLOW TO PICK UP ON THE PERSISTENCE OF INFLATION. OTHER PARTS WERE TALKING ABOUT TRANSITORY, THEY SHOULDN'T HAVE BEEN DOING THAT AS LONG AS THEY DID. BY THE FALL, OF 21 THEY SHOULD HAVE FIGURED THAT OUT. I THINK IT'S AN ISSUE. I THINK THE FED HAS SENT A GOOD JOB OF PIVOTING AND SAYING OK INFLATION IS OUR MAIN PRIORITY. WE HAVE TO MOVE REIT'S UP. I THINK A SUCCESS IS THAT EXPECTATIONS HAVE NOT BECOME A NIGHTMARE. THAT WAS THE MAIN CONCERN BECAUSE THIS IS WHAT HAPPENED IN THE LATE 70'S EARLY 80'S. THE FED LOST CREDIBILITY. IF SO FAR THE INFLATION RATE HAS COME DOWN WITHOUT HAVING TO GO TOO FAR. YOU OFTEN ASK ME TO GIVE PEOPLE GRADES, THIS HAS TO BE IN INCOMPLETE. TOM: LISA, FROM THE UNIVERSITY OF CHICAGO JUMP IN HERE WITH THE FINAL QUESTION. LISA: YOU WERE TALKING ABOUT THE POTENTIAL TO RAISE MORE AND I THINK THERE'S ANOTHER QUESTION. ARE PEOPLE UNDERESTIMATING THE DURATION OF THE FED HOLDING RATES WHERE THEY ARE AND WILL THAT POTENTIALLY BE SOMETHING THAT'S MORE TRAUMATIC THAN RAISING RATES FOR THE RICH COULD ACCELERATE A BREAK THE SORT OF TRIP AND DEPOSIT SET OF BANKS. HAVE WE SEEN THE FULL EFFECT OF THAT? >> I THINK THAT'S ONE OF THE REASONS WHY THE FED WANTS TO TAKE A LITTLE BIT OF A SKIP RIGHT NOW. I THINK THEY WANT TO STEP BACK AND ASSESS WHAT'S GOING ON WITH THE BANKING SYSTEM AND WITH CREDIT FLOWS. WE HAVE SEEN MORE AND MORE REPORTS THAT SMALL AND MEDIUM-SIZE BANKS ARE PULLING BACK AND THEY ARE FINDING IT MORE DIFFICULT TO GET CREDIT. YOU HAVE HIGHER RATES AND PULLBACK IN CREDIT THAT'S GOING TO MAKE IT DIFFICULT FOR THESE JOBS TO CONTINUE TO BE CREATIVE. TOM: YOU BEGIN TO TEAR UP WHEN THE CHICAGO LOST THE ANALYSIS. >> FOR SURE. TOM: NO QUESTION ABOUT IT. WERE GOING TO MAKE THIS A MONTHLY THING TO HAVE THE PROFESSOR WITH US TRULY ONE OF THE WONDERFUL FORMER FED GOVERNORS. I DON'T KNOW WHAT TO SAY AFTER MONTH AFTER MONTH. YOU NEVER KNOW WHAT TO EXPECT WITH THE JOBS REPORT. I EXPECT THE VICKS 15.30, A 14? THIS IS BLOOMBERG, GOOD MORNING.

Channel: Bloomberg Television

Views: 71,975

Keywords: Jon Ferro, Lisa Abramowicz, Tom Keene

Id: MK0XI1c739k

Length: 151min 25sec (9085 seconds)

Published: Fri Jun 02 2023