tv Bloomberg Surveillance Bloomberg November 6, 2015 6:00am-7:01am EST
? on this job's day, we look at the american job making machine amid no inflation. the central bankers of the world will not they'll a stagnant global economy. in this hour we speak to the will not bail out a stagnant global economy. in this hour we speak to the other central banker. good morning, everyone. this is "bloomberg surveillance ," live from our world headquarters in new york. it is friday, jobs day, november 6. francine lacqua, we go from mark carney's shock over what could be a shock at 8:30. jon: the jobs report, everyone is looking at it. about labor talking participation, wage growth, and labor participation. the world wants to be an expert because it gives vindication on whether we get the fed hike or not. tom: we are data dependent or
something like that. what we are is news dependent. right now from the first word news desk, vonnie quinn. vonnie: it is jobs day in america, and we expect a gain of 185,000 in nonfarm payrolls or october. the unemployment rate is expected to move downwards to 5%. chair janet yellen's latest outlook that she said this week that improving economic data will make a rate increase a possibility in next month's policy meeting. bloomberg will break down the numbers as soon as it is released. tighter security standards for international flights are expected from homeland security. are theu.s. measures latest fallout from the crash of the russian airliner in egypt. british tourists were stranded when british -- when britain suspended flights in and out of the area. after speculation that a bomb brought down the airliner. the airliner crash 23 minutes
after taking off from sharm el sheikh. 15 people are dead and the small town is flooded after a dam broke in southeastern brazil. homes are buried in mud and dozens of people are missing. a project owned by two of the biggest mining companies. for the first time in a decade, americans appear to be smoking more. cigarette sales have been going up for the last several months. this is the first year since 2002 that sales volumes increased. among the reasons, savings on gas, and softening government anti-smoking programs. and the next residential debate shows the next changing tide in the campaign. chris christie and mike huckabee will not be on the stage when the republican candidates meet in milwaukee. they will join bobby jindal and rick santorum in an earlier forum.
three candidates do not qualify for either event. you can get more on these and other breaking stories 24 hours a day at bloomberg.com. tom: who decides this? a jr. debate. is it not getting a little bit too late for this? you guys in ireland do this better. that is all there is to it. let's get a data check. euro,erling is weaker, 1.0872. want to get, i through this in two seconds. here is the success of the american job making machine. payrolls, 50 years of nonfarm payrolls. something changed in 2000. we have been flat, we have been circle -- we have been cyclical. with us this morning -- i guess
nothing matters more than jobs, but to have phil about her to be -- but to have willem buiter with us this morning is very good. before we get to jobs, i need you to reconfirm your call for a global recession. give us the probability. it is a global growth recession, accurately. tom: vonnie fair. ,illem: the exchange rate roughly 2% next year, is the most likely i have gotten. up riskttle signs of and considerable evidence of -- tom: you saw governor mark carney yesterday. there was the "yeah, but." and at is no inflation lack of animal spirits.
partly because of external conditions, but also because things are more slack domestically than the data would indicate. tom: you have been good with your team of looking at the micro, looking at the view from 1000 feet and then going to 70,000 feet as well. with the chart that we just showed, with the breaking job formation in 2000, why did that happen? ,as it an overleveraged society technological progress? why did we see a change in the slope of american job formations? --lem: it is very different it is very difficult to rationalize. it was very sudden. it is a much smoother process, and technological change likewise. this is going to be a long-term issue. tom: something changed. willem: it is very poor in this. tom: ben bernanke would call
this a right angle. we had a right angle turn in 2000 and i cannot get a straight answer as to why it happened. willem, when you say you see more downside risk toward the recession -- even if we get u.s. jobs data that is stronger than we expected, why take the chance of hiking now, or this year? not a: it really is terribly important issue from a macroeconomic perspective. now, last september, or february or in june. it will be slow, gradual, and not to a very high level before we have to start cutting again. from a macroeconomic growth point of view, there is an argument for sitting on your hands and the financial stability argument, and it might be sensible to go earlier.
francine: meaning that if you do go earlier, at least you are sure you can do a small, gradual increase, because if you wait too long and the economy is running full speed ahead, you can hike rates too fast, too big? signs of fluffre in u.s. credit markets, --ecially at the corporate especially with corporate leverage. in some sign the fed cares about its financial stability role might not be redundant. tom: you look at the jobs data we have got today, and the stability, and the fact is the optimists away from professor ,auder -- from professor buiter there is a whole other side of the coin. vonnie: what are you looking exactly four at 8:30?
we are looking for concern over 185,000, i think. this is one month over a very noisy series, and the fed has managed to confuse most people in the markets about what really will drive their decision. i think 100 50,000 makes it quite likely that it will feel 150,000ed -- i think makes it quite likely that it will feel emboldened. the six-month, 199,000, call it 200,000. that is sort of a willem buiter willem: itsn't it? is a slow decline in the growth rate of employment, yes. not a sign of strength. the u.s. economy i think is --
say, a global growth recession. to find that for our audience, please. willem: a growth recession is is below capacity and the growth rate of output is also below capacity. the fact that the momentum is slowing is important, but it still equates to about a 1% fall in the unemployment rate, even 2% year-over-year. but the question is what happens when we get to the point of labor shortage? tom: 4.9% is not 5%, is it? willem: no, but it really matters a lot, whether any unemployment comes out of jobs or through declining participation. did you see how professor buiter just lectured me there?
he says do not ask me stupid questions like that. francine: if you look at wage growth, why is wage growth in the u.s. so difficult to achieve? willem: well, there may well be long-term structural factors that in the past combination of globalization and technological pressure onecular the ability of labor for wage but technological pressure may well be the fact now. that is combined with the absence of strong unions, and that means upward pressure on labor costs is hard to come by. tom: we prepare for the important details of 8:30. before that, alan krueger will join us from princeton
university, of course working with president obama a year or so ago. and then on to bill gross with his market reaction. bill gross with that important essay this week to get the long curve, higher yield, and the short end of the curve, relatively lower yield. he wants to go from a twist and shout to an operation switch. stay with us. "bloomberg surveillance." ♪
continental is prepared to return to work just weeks after a heart attack. it was his first indication since taking medical leave in october. already director when he was hired from csx in september. ratings are downgrading the bank, setting asset quality. earlier this week, the london bank revealed plans to tap investors for more than $5 billion, eliminate thousands of jobs, and cut risky assets across asia. that is the bloomberg business flash. tom, you have breaking news on square. tom: this has been widely anticipated, not nearly as complex as what we saw with i cap this morning. i have got to be honest, i have
never used square. thee quill and i have blotter at home with the big, huge checkbooks like i am in "mary poppins." ceoie: jack dorsey is the of square and he has just -- tom: how can he do two companies? vonnie: this is a question we have been posing for months and months now. delays withey had the ipl. it had been difficult to bring the company public, but obviously now it is -- as big this going to be as the japan post office ipo? vonnie: it is going to be huger. tom: it is going to be ginormous . speaking of john norma's, how about the moonshot -- speaking of ginormous, how about the moonshot of walt disney? it was pretty good. vonnie: we should mention that revenues did not come up to
estimates. nine pluswas still a percent gain in revenue. in august it was disney that prompted the selloff in media stocks, and this is about three months ago and had adjusted the forecast down. the demise of espn and cable was called early. tom: the answer is no. vonnie: there was a little bit of meeting in the middle. bundles andluded in so forth, but the message from bob eiger was that content is still king, and he made it sony -- , saying that the they have to have ultimate trailing challenge in
"frozen." like on jobs day, you would say "let it go." go" plays] tom: look at that. "frozen" is old news. better, they do not have "pan." francine, they have avoided the bottom shells, like what warner is putting up with right now. you look aten disney, they have so many parks, it is a little bit like a microcosm of what the world and the macro consensus is. if you look at the parks, they did not do so well. 7% and hadncreased lower attendance in hong kong, higher cost at disneyland paris,
and you are opening the shanghai disney resort, and that incurred much more cost than they thought. it really gives us a lowdown of the world economy. vonnie: this is one of the surprises. they did not perform are stored nearly well. the cable company did not mean that much saving. this is the point michael nathanson was making. er andere is before eig here is after. it is the moonshot. that is espn, right? vonnie: it has not quite happened yet. will it happen? michael nathanson say you can stay on this juggernaut you? he thinks we will all be buying individual football games, if you want.
tom: there is the research on the street -- right, wrong, and always interesting, to say the least we know that willem buiter is right and wrong every once in a while. also jason furman -- dr. fuhrman, i should say. coming out of the think tanks of washington, if you will, more so than academics. an on at 9:00 this morning. ♪
francine: welcome back. you are seeing live pictures from london. , not as gorgeous as it is in new york. tom keene in new york. tom: when does the sun come out? brits love speaking about the weather, but if you realize the amount of money that house prices took over the last three years, can you imagine if we had better weather? everybody and their mother would be here. tom: that is true. you sound like gordon brown. i do not want to get into the politics of this, but i thought it was very thought-provoking. in "the new york times," here we are as we tilts toward those important paris meetings. always egan, who is
going to the right. i understand, francine, that is inflammatory, but it begins to frame the debate in the united states as we look at the article the other day in "the times" on coal in china and the challenge on diesel engines. this is a serious issue that is in front of our face now. francine: it is an argument that everyone in europe accepts, that andate change is happening
we have to do something to stop it from getting worse and worse. buiter.ing in willem it is difficult, i guess, to model the climate changes on the macro economy, but it will, in 30 years, have an impact. willem: oh, yes. it has already had an impact. see levels are rising. global warming is a reality, and it will only get worse, yes. there will have to be massive investments, never mind alreadyon, to what is in the pipeline. yes, this is going to transform not just the global economy, the global policy as well. tom: i do not know if you want to opine on this, but it is important. denmark/copenhagen was a disaster. optimismve a greater that the institutions are in place to get something done in paris? willem: it is very hard to look
at the cast of characters we are likely to see there and expect anything terribly concrete other than declarations. there will not be any agreement on benchmarks, including a timeline, actions to be taken, emissionss to reduce by so much over this period. i hope so, but it will be a minor miracle. tom: willem buiter with us, and we will talk about the american economy. monday we have a huge treat for you. out ofwith the oecd brandeis university, truly one of the world experts on trade. catherine mann will join us. stay with us this jobs day. ♪
china says it will lift its freeze on ipo's by the end of the year. other stories -- an unexpected loss as sales of jaguar and land rover slumped. check out our website. they are great stories. let us know what you think. let's get to bloomberg first word news. vonnie quinn? vonnie: the latest on the u.s. job market is due out in two hours now. ofnomists expect a gain 185,000 in nonfarm payrolls, a slight drop in the unemployment rate to 5%. janet yellen says that improving economic data would make a rate increase a possibility in next month's central-bank meeting. we are following a new development in the aftermath of the russian jet crash. easyjet says egyptian authorities are blocking most of its flights out of the sinai peninsula.
was expecting to take thousands of tourists back to britain today. the tourists were stranded when britain suspended flights to the area, prompted by fears that a bomb brought down the russian jet. no cause has been pinpointed. at least 15 people are dead in a small town after a dam broke in southeastern brazil. cars and homes are buried in mud and dozens of people are missing. it happened yesterday. britain should be ready for an interest rate increase next year. that is the outlook from bank of england governor mark carney. rates were unchanged, a decision the u.s. said it may look at at its next meeting. mark carney spoke exclusively with bloomberg news. i rather have the majority of the british people thinking rates would go up in the next year? is, i would, because that
reasonably prudent behavior given the likely path of rates. ofnie: you can see much more that exclusive interview tonight at 8:00 eastern on bloomberg television. on these andore other breaking stories 24 hours a day at the new bloomberg.com. tom: thank you so much. futures at negative two right now. we are pleased to bring you willem buiter with all sorts of perspective out of cambridge, out of yell. in 1998 you were teaching at cambridge university, slaving away at macro 302 or whatever it is. what are the new illusions that we have with christine lagarde's new mediocre compared to 1998? can we make linkages that would lead to the instabilities that we saw then? 1998 had an emerging
market financial crisis that had remarkably few repercussions. emerging markets are much larger now. more than half of world gdp, more than half of world trade. financial conditions will impact much more. it is not the same story at all. tom: so the look at the brazilian real -- let's go to the terminal. here is the success, the strength of the brazilian real and the recent carnage, up to 4. we have come up a little bit. janet yellen controls that. she is the central banker of the world. was that true in 1998? willem: yes, it was as well. that is not different, but there is a significant brazilian contribution to their decline as well. rate andu.s. interest from china and commodities.
vonnie: i think janet yellen would probably reject a little bit the claim. it is true that u.s. interest rate policy affects countries everywhere, and in eastern europe as well. we have the norwegian central-bank just this week needing to do something. willem: somewhat hope so because pangs are dangerous features -- pegs are dangerous features. manynk we are going to see -- at what: when you look christine lagarde has to say, going back to tom's point about the new mediocre, saying there is no room for policy mistake, if we do not raise rates very soon in a country that can afford an interest rate hike, how do they deal with the next downturn? willem: you are going to have a
problem because it is almost certain that even if we raise december,he u.s. in and in britain in february, which seems early to me, then if we do not raise rates enough and fast enough for good economic reasons, to avoid being back within a few years as the next downturn comes, we are going to be exactly where we were before -- ineffective, ballot -- back to balance sheet expansion of 2005 and 2006, hopefully at that point we will be able to use fiscal policy, which is impossible for political reasons and other reasons in europe and the u.s. to do with that. monetary policy will be back in diminishing returns
in the next downturn for sure, not just in the u.s. but everywhere in the advanced world. when do you see the next downturn? we were talking about growth recession. are you concerned we may see something a lot more brusque? willem: i have no downturn in fact, but this recovery in the u.s. is now six years old. respectable middle-aged, close to retirement . it is slow, and it can go on quite a bit longer. it is good for a few more years, of the 10-year period positive growth will be unusual. you can expect that the next downturn will be before the end of the decade. to 8:30 this back morning. is the linkage between investment in jobs broken? of general motors with
100,000, 200,000 employees. is, is that linkage that you studied in school gone between let's do a project and employ somebody's? -- and employ some bodies? qualitatively, yes, and it will only get worse. -- quantitatively, yes, and it will only get worse. see theoing to destruction of a whole range of white-collar jobs as well as traditional factory jobs that have been robot sized -- that have been robotized out of existence already. middle-class of
and white-collar workers will find their jobs at risk over the next decade and beyond. tom: bill gross is joining us later this morning. his view is of a global recession out five or six years as well. we will digress away from jobs. robin brooks will join us. really looking forward to talk to brooks about his call, like willem buiter, the euro well through parity. this is jobs day. "bloomberg surveillance." ♪
i hope i am pronouncing that right. again, a transaction that was widely expected. francine: it was widely expected because they have slowly bringing up their stake in youku toudu, the chinese equivalent to youtube. the figures are staggering. there are more than 500 million people in china accessing the internet from mobile devices and toudu.ouku do they go for the facebook model of owning different bits but using them as a standalone essentially, or do they integrate money? tom: it is an interesting transaction to be done in two 2016 as well. much more throughout the day. lots more going on through m&a activity.
let's move back to foreign exchange. 1.0882. robin brooks is on the phone. you, like our guest willem buiter, looks for the dollar to straighten. what happens as we approach parity? will there be a momentum to get that down to below the .95 level? been: the basic story is -- the basic story has been that i think conceptually most agree that the euro should be lower, but since march the euro has rebounded quite stronger -- rebounded quite strongly. it rebounded very viciously in the next couple of months all the way back up to 114 -- all the way back to 1.14. that has damaged conviction in what we down view, so are seeing now is, as the euro has been weakening, as people
start to build conviction that the ecb is going to ease again in december and people get more comfortable with the december liftoff, they are chasing this. we are seeing chasing, basically. tom: i like the idea of chasing. from an economist's standpoint, frame for us the emotion points as the dollar get stronger, whether you use dx why or trade weighted major as a proxy. the euro -- where does it get emotional for america that we have a strong dollar? we are forecasting for the dollar to strengthen another 20% from here over the next three years, so roughly by the end of 2017. that is a big number, and where does it get emotional? the main question is, can the u.s. economy sustain such an up move in the u.s. dollar, and can have policy in that
environment? our view is yes. francine: if you look at central-bank divergence, does it make sense playing euro-dollar or euro-yen? we understand that the ecb will do more in terms of qe, and maybe the doj stays put. robin: we look at all of this through the lens of what central banks say they want to accomplish versus where they are. in our view, both the ecb and the boj are way behind in terms of achieving their inflation forecast, which we think are the single most important thing. we think the boj, even though obviously the recent meeting was disappointment, has to ease that one of the upcoming meetings. 1.30 for forecast of dollar-yen, so i really like upside down dollars-yen, and we
are forecasting parity for dollar-yen for the end of the year. tom: robin, i am going to show you this chart on the phone. trust me, it is "surveillance." it will work. willem buiter, if i get this 20% dollar approaching accord levels. that has to be the instability you're talking about. willem: it is hard to see the in usconomy being robust to support the monetary policy that would give you that extension. it would be a huge blow to the -- robin.ere it is, what does it do to trade worldwide if we get the goldman sachs call of 20% on the dollar. get the goldman sachs call of 20% on dollar? robin: we are forecasting that to happen by the end of 2017, so
there is a significant amount of time between now and then. the u.s. economy is largely a closed economy. we are services driven. we had a strong i sm this week. sectortradable goods will remain strong. tom: robin brooks, thank you so much, with goldman sachs, from washington. this is stunning. if you get a goldman sachs chart, we will have to go over three blocks and have cocktails at the plaza. vonnie: you were nodding your head when you said by the end of 2017, though. willem: i still think it would be very painful. the u.s. is not a closed economy. it is not more closed to trade dan japan is. closed toot more
trade dan japan is. -- it is not more closed to trade than japan is. we do jobs day with alan krueger of princeton university. we will talk to alan krueger about the jobs market. we will talk about the princeton goalie who is playing in the national hockey league. stay with us, folks. "bloomberg surveillance." ♪
tom: francine lacqua will be -- lookus in new york a.m. on monday. lacquaoverished francine with us at 5:00 a.m. in new york on monday. say,ine: i was going to tom, janet, help me out here. tom: you can thank john micklethwait and mark carney. how about a forex report on a jobs day? i will call it quiet. dollar-yen, abenomics friendly
over the last few days. go down to sterling -- weaker, weaker. euro-sterling, i put up. i have no idea what that number means. i just did that for francine, nobody else. francine? francine: we are all looking at the forex report. coming up shortly, it is "bloomberg ." what do you have for us today? david: i was going to talk about the jobs report, but i am a little worried about your bank account now. we have jobs numbers coming out. we will get the numbers in a little less than two hours now. we will talk with alan krueger and jason furman, chairman of the council on economic advisers to the president. y ceoso have blackberr john chen. we will talk with him about that. finally, disney came out with a
earnings yesterday. they have had a fifth record year of performance. bob eiger had a fair amount of things to say about watching tv in the future. francine, we will keep a lookout for your bank account. francine: everyone is worried. i worry for my kids. thank you, david westin. tom, it is time for your single best chart of the day. tom: let's do it on jobs day. carl riccadonna is joining us as well, from bloomberg intelligence, with willem buiter. throw up that chart. bring up that puppy right now. this is a glory to see. it is the u.s. unemployment rate. all i know is that if we get a 4.9% print, it is different than a 5%. 20 years ago, it changed. we have been very rarely below 5% in recent years. carl riccadonna, we come down.
what is the significance of 4.9% versus 5.0%? will get us closer to neutral unemployment, but we will not know until we see wage pressure. linear see a strikingly piece in the unappointed rate. you can see a line very tightly from the peak at 10% all the way down to 5.1%. if we stay on that linear trajectory, we will blow through the fed's targets for year-end and also for neutral, we could be below 5% easily before the end of this year. more toward 4.5% by the first half of next year. there is no evidence of a soft landing for the unemployment rate yet, and this is going to potentially lead policymakers to , blowing through their
projections, and therefore they have to get off the zero bound and start raising rates. francine: what is a good jobs number today? i have heard everything from 150,000 tofrom 175,000. of decemberd means liftoff, we need to see something north of 200,000. my expectation is that hiring managers did not have time to process the uncertainty in the financial markets and global economy at the time of the september jobs report, so potentially october could look worse than september and august. , how dofessor buiter academic policyholders recalibrate their calibration given these changes? if we go to 4.9%, 4.8% and there is still no inflation, how do you finesse that? the u6,if you look at
it is still half a percentage point above previous cyclical rather's -- above previous cyclical measures. tom: is it a different institution that has to fix all of this? effectively, this it is a basic illiquidity traps to do anything. thehe case of the u.s., massively training of sort of middle-aged men, and indeed even the younger seem to be out of the labor market. tom: how do you respond to willem buiter's called for a global recession? carl: i think that global growth
recession is not an unreasonable estimate. you have china slowing down, you have big swaths of emerging market economy slowing down, brazil facing down a sharp contraction. i think it is reasonable, but the u.s. will provide the cap out of that growth recession. tom: francine lacqua, save travels as you migrate over here. look forward to seeing you monday morning. will aboutonna and her, thank you so much. withg up, we continue "bloomberg ." stay with bloomberg. ♪
and your bentley has gone digital. want to customize your new $300,000 car? there is an app for that. david: welcome to "bloomberg ." i'm david westin. stephanie: i'm stephanie ruhle. it is friday morning. we are wrapping up our fifth week on "bloomberg ." david: day job numbers coming out. stephanie: we have a lot to cover. guest is also a fantastic singer. we might get him to sing later in the hour. termeff just coined the prince