tv Bloomberg Go Bloomberg May 6, 2016 7:00am-10:01am EDT
>> wi-fi finds goldman sachs cuts operations to 10% of its staff. ♪ david: welcome to "bloomberg ." here withwestin jonathan ferro and megan murphy. it is a treat to have you because all eyes are on washington. the big story is the jobs report out in 90 minutes. jonathan: it is the most important jobs day until the next one. guests a great list of including our kruger and bill gross coming up after the numbers break in 90 minutes time.
let's check on the markets for you. two hours and 30 minutes away from the market opening in new york and futures are a little bit softer. the s&p 500 futures are negative five. over in europe, the stoxx 600 getting beaten up this week coul. the ftse off by 8/10 of 1%. here's the dollar ahead of payrolls. the euro-dollar 11426. the dollar on the back foot they re. a forecast for low inflation down under. yields are creeping a little bit lower, down a basis point at 1.4% for the 10 year. big moves in the bond market, matt. matt: that is one of the stories we will be focused on throughout the hour. i also want to kick off my stock move percent with what is i goig
on in europe. another loss that was 42% narrower than the same quarter last year. a second-half rally as steel prices improved. man group is the world's largest publicly traded hedge fund. bywas moved from a cell to a off of hedge fund fee structures. paschi took fewer bad loan write-offs as they are up, but it is a penny stock for real. $.65 is where the stock trades in italy. herbalife shares are soaring after it says it is close to a resolution with ftc overcharges it runs a pyramid scheme. the company estimates it will pay about $2 million in fines. they reported earnings 25%
higher than the streets estimates. take a look at my terminal and i can show you what happened after the earnings report last night. you can see a 14% jump in the aftermarket trade. are followingre the trend that we have seen in tech results this quarter and that is disappointed. hit onis really taking a concerns about financing for its small business customer loan program. it is a service viewed as a growth area for the digital payments company. square is down 17%. gopro reporting a loss after posting a profit in the same quarter last year. theake it all worse, launch of its drone karma will not meet the launch date. david: thanks very much, matt. less than 90 minutes from now, we will get april's jobs numbers. have 200,000 jobs last month. joining us now are in manuel
emmanuella and howard ward. besides the 200,000 number, what other numbers should we be to?ying attention today, ityrolls for is separate from the establishment survey in the household survey. those numbers tend to be a little bit different month-to-month. over time, they tend to come together, but today, it's the private monthly payrolls. that number has been to 50 and 260 in recent months, but it should betray new lower. david: what about labor participation rates? should we want that number to go up or not go up? howard: i would like it to go up because that means people have more confidence in the economy
going forward. they are backed looking for work and feel more confident that they will find work. megan: does that mean we are going to see wages potentially? we have more people in the labor market and actually reduces pressure from businesses to bring their wages up. >> higher participation rate means we are getting a little more labor force reentry, but i think it is a good sign in the long term because it suggests the labor market is so strong that it is pulling people back into the search for jobs. it's good., i think wages will rise a little more slow than we thought. at 72 basis points, what does that tell you about with the bond market thinks about all the noise we have heard so far this week? howard: the economic data has not been very strong. it is been softer than we would all like. the bond market is not the least bit concerned about a runaway
economy. i cannot imagine the fed tightening in june. i do not think the data supports that. if you look just at the labor market data, you could make the argument, but once he moved beyond the labor market, the numbers are not there. fears of a global slowdown are still there. they can't do it. jonathan: what is the intent of saying june is live? howard: it bothers me that some of the fed people are out there speaking all the time. i would frankly prefer a fed that was quiet. i would prefer the said from the 1970's and 1980's where they do not say a thing. if anyone is going to speak for the fed, let it be the fed chairman. megan: do you think there is a member that we could hit this morning that would potentially put june back on the table? emanuella: i think it is on the table, so i'm in disagreement with howard. i think the fed thinks it's a live option. that impact was highlighted in
the last meeting where the phrase about global concern was taken up. june is definitely in play. if we get a number of 200 thousand plus, it is a number that the labor market is robust. perhaps there is a little concerned about labor market slack, but the pace of job growth will be confirmation of the most important engine of consumer end of income still there on the economy. david: to think about her point, isn't the fed a sickly saying we do not want to surprise anyone? isn't that a good thing because the worst thing is to surprise the markets? howard: i do not know if that is so bad. ifthe fed tightens in june, what i see in china and japan and europe, the negative rates, i think 35% of the central banks in the world have a negative interest rate target. when i see this kind of a world and the fed tightening in june, you will have a currency problem. you'll have a stock market problem.
you will have some real upheaval. megan: if they are truly based onen fed and not reaction in the markets and not running away every time they have a negative market reaction tightening, isn't that getting away from the policy want them to have? howard: i think the fed needs to be data dependent. they say they are data dependent. i think it's going to slow. ,he labor data has been strong the strongest part of this recovery. as we look at the expectations for today, that number is going to come down. it is coming down to 200 or 175 of the next few months. the strongest part of our economy is going to now start to weaken. that is the payroll growth. the rest of it is not there. manufacturing is basically in a recession. you do not want the dollar to get stronger. the week of the dollar gets, the more bullish i will be. the data is ok and the pm eyes are above neutral. , it's just notmi
happening. i want to pull it up. jonathan: you do not sound very bullish today. matt miller, what have you got? matt: i've your first word news. do you want to see a chart first? david: we want the chart behind you. matt: this is an interesting look at the labor market. this is average hourly earnings and we were up 2.5%. it is still better than a stick in the eye as far as wage growth. this is labor participation. this is some excess slack coming off. if we are out of slack now, does that mean we see wage growth start to go up? emanuella: it is not clear that we are out of slack now. our baseline forecast is that the participation rate will stay at 63%, but there is risk that you can have some reentry and perhaps there is slack in the economy. it is not all bad news.
trend intinue the up the participation rate, the business cycle has more room to run. you can perhaps continue to see an expansion without the inflation that will end up crippling the recovery. it is not all bad news. it suggests that we will eventually see wage pressure. for now, it is slow in its building. david: please stay with us as we continue our full coverage of this jobs friday. we will have alan krueger and janus capital possible bill gross joining us. now can we please have first word news? matt miller with first word news. matt: a number of prominent republicans have backed away from the parties likely presidential candidate dr. on donald trump, but he now has one of the richest republicans in his corner. children allison is telling "the new york times" he is backing donald trump. in regionalvoters
elections gave no sign that they are ready to defy their leaders and leave the european union. prime minister david cameron's conservative party appears to be on the brink of picking up council seats. he is opposed to the u.k. leaving the eu. nationalists are on course for a third straight victory in scotland. herla sturgeon will extend turn as the head of scotland semi-autonomous government. the wildfires in western canada have spread to an area bigger than new york city. the numbers are staggering. more than 80,000 people have fled the people of fort mcmurray. the fire may turn out to be the costliest catastrophe in canada's history. insurance losses may go over $7 billion and force oilsands producers to cut back their output by 40%. dayal news 24 hours a powered by news bureaus around the world, i matt miller. megan: coming up, a drop in
matt: here's your bloomberg business flash. largest right hailing services taking another big step in its battle with cooper for the world's largest market. is close to raising about $2 billion in its latest round of funding. the company is seeking a valuation of $25 billion, making it the fourth most valuable start up in the world. a german chemical maker is closer to buying materials and
added it to unit from air products and chemicals. the deal will be valued at $3.5 billion. the ceo ensured investors that the company would not overpay. a trial made for hollywood. it begins today in los angeles. 92-year-old whether media mogul sumner redstone was mentally competent when he threw his ex-girlfriend out of his home and remove her from overseeing his medical care. whoverdict could decide ends up can strong his stake in cbs and viacom. that is your bloomberg business flash. jonathan: matt miller, thank you very much. goldman sachs extended job cuts in its security unit. the bank is cutting 10% of its fixed income unit, up from 8% previously announced. for more, michael moore joins us from the city of london. aboute talked all week
what ubs called paralyzing volatility could not just european banks but the u.s. banks as well as seems. you are seeing it and all the metrics that we have from goldman. they put out their 10-q this morning. is of the metrics they used trading days where they had more than $100 million in revenue. they used to be that was more than half the time that they would crack $100 million in revenue. the first quarter, they had three days. it is a pretty dramatic decline in activity on the day-to-day basis for them. jonathan: we talked before about immediate job cuts desk cost cuts that could be straightaway like trips abroad. what do we'll job cuts tell you about a strategy and an outlook as well? michael: that seems to be a more permanent move. if you are cutting 10%, typically, goldman cuts 5% of their staff around this time of the year.
to do double of that, it certainly says a lot of what they think the environment is now and what it is going to be over the next 12-18 months because a lot of these cost savings you do not see until six to nine months out. megan: let's pick up on that in the fixed income market and how many of the cuts are permanent and how much is cyclical. it is a business tremendously weighed down by capital requirements across the sector. how much is this the tail end of the cycle? the nextome back in 12-18 months or the next 2-3 years? michael: the thing that lloyd blankfein constantly says is that the cycles can turn quicker than you can imagine. that has been kind of his this isas he says that why the bank is holding on. this is why they are not cutting
major parts of the business and why they have stuck with this the business. he thinks it can turn very quickly. that just has not happened over the last six years. with the continued decline in this business, you have to adjust somehow or otherwise you come under pressure from your shareholders. that thises to think is partly cyclical and can bounce back, but there are some secular elements here. david: matt, i want to bring you in on this question of volatility. matt: i have a chart of volatility and we have a great story on bloomberg.com today about this. it has paralyzed volume. spiking up the vix to 40 and hovering around 25 this year. you mentioned goldman sachs only had three trading days over $100 million. back in the second quarter of
2009, goldman sachs had 46 trading days over $100 million. was is when the vix averaging 40 if not 50. what is going on with trading volumes? michael: 2009 was goldman's record year. a lot of that was markup. to their inventory, they cannot hold up as types of inventories anymore because of capital rules. that is a big piece of it. in 2009, you had a one-way trade as credit spreads narrowed and you had the fed stepping and. in. right now, there's not a lot of certainty like there was back then. jonathan: michael moore, thanks for staying with us. we will put howard on the hot seat on where opportunities are in the
jonathan: this is "bloomberg ." about one hour in eight mins away from the payroll report, here's the scorecard. dow futures -37 points. s&p 500 futures down around five points. over in europe, heading for the biggest weekly loss on the stoxx 600 since february. switch up the board quickly and this is how we are positioned ahead of that payrolls report with the euro-dollar at 114.25. the dollar on a little softer footing. the rba is looking a lot more dovish than just a couple weeks ago. treasury yields are 1.74% on the 10 year. year, 110 basis
points, just 73 basis points on the u.s. two-year. 80% of the way through earnings season so far, so we will get an earnings wrap with matt miller. matt: we are pretty much done here. we have a drop of about 9% year-over-year. the first quarter is very weak as far as an earnings growth was concerned. want to mention ea real quick . this chart is amazing, so check it out in the bloomberg. what this shows you is a look over the last basically 40 years. the blue line is nonfarm payroll. a massive dividend to the overcial crisis, backup 200,000. does the job number follow? megan: we are just over an hour away from the nonfarm payrolls data.
ward.with us is howard howard, let's talk now about where you actually see opportunities in this market. single out some stocks and sectors that you believe in such a difficult to predict market that there may be room to grow. howard: i sort of look for names with growth, perhaps stocks that did not do well in the past year or coming back into favor. two names come to mind -- time warner and cbs. both just reported good results, better than expected. they seem to be transitioning into this new cord cutting area successfully because they have the networks that people are going to want to have on their skinny bundles. they're going to pay more for the skinny bundles than they are getting now. megan: skinny bundles are shaving, but how are they thriving though? is it because they have these must have shows? howard: advertising has been
stronger than expected, part of that due to the election campaign. and stillmarkets strong demand for quality content. that is good for them. also, housing. we have had a really long drawn out housing recovery could it is . it has been slower than a typical recovery, but we have had a strong uplift in the last half months. formations that have been held back previously bodes well. it shows a lot about the housing recovery. i like whirlpool as a play on both old households in new households. lenar developing property in florida and texas. megan: what about in tech? howard: in real growth, you have got to stick with facebook and google. they are collecting 85% of all the ad dollars that are transitioning to the internet
are going to those two companies. they just reported very positive earnings, especially facebook . facebook knocking out of the park. it is growing at 30% plus. i do not think it is that expensive. in the case of google, you're paying 20 times forward earnings for a company growing 15%. stick with those winners. megan: thank you so much, howard ward. emanuella will stay with us. david: we are an hour away from the jobs report in the united states. coming up, we have alan krueger and bill gross on "bloomberg ." ♪
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the bond market i want to talk about. global bond yields near all-time lows. the front-end of the german curve couple basis points from the record low on to your notes -- two-year notes. the euro-dollar at 1.1424. has been volatile to say the least. this is "bloomberg ." we will break down those markets for you in just a moment. biscuits and first word news with matt miller. have vladimir putin will a rare one-on-one meeting with a group of seven liter. eader. with vladimir putin and argued that western leadership engage with putin. notident obama asked abe
to make the trip. elon musk has done it again. spacex has landed a rocket on an ocean-based platform. it launched a japanese can indication satellite. the americans cup series comes to new york this weekend. catamarans will take part in this weekend's qualifying races. the course is a few yards away from the skyscrapers of lower manhattan. 35th americas cup will be held in bermuda. david: that looks cool. tom: like 40 years ago. i've been able to some fish. jonathan: i could see tom keene doing this. megan: who is your derby pi ck?
tom: who the rotunda team just told me. they have the numbers, but i threw it out. jonathan: tom keene is joining us from bloomberg radio. paralyzing volatility is what it has been called this week. volatility across the board causing cautious sentiment among banks and investors. hear what some of the biggest names in finance told bloomberg this week. >> we have very supportive monetary policy. it will continue to support a tepid economic growth environment, but there are not a lot of bullets left to boost growth and to have breakout growth. >> we can see the escalation coming from the u.s. elections and potentially you see a lot of factors that may affect market sentiment. in that sense, you see volatility, but it's not the kind of volatility translating to activity. it's a paralyzing volatility. >> the volatility we saw in the
first part of the year really should cause us to slow down capital markets. very little equity issuance in the first quarter. ipo activity almost nonexistent in the first quarter. definitely if you are a ceo and you're looking at an environment where there is market volatility, you slow down. >> one of our board members say reducing your teams is your best return on capital. we focus for a on costs and every single asset class. we are counting on those across the board. arethan: when returns generated through cutting fees, it's a little bit of a problem. from merrill lynch. tom keene, you have been following the bond market all morning. that sentiment has been seen. tom: i do not agree. i think that the markets are
nuanced an interesting right now. i think we need to define uncertainty right now. this is peter bernstein one wanted risk is where you know where you are. you have a set of guesses that will get you there. uncertainty is where you do not know where you are. the volatility is pretty good and there is excellen actually leveraging in the markets. the volatility they are talking about is macro volatility. i think ubs nailed it when they said they are surrounded by cacophony of macro risks. emanuella: i agree with that. one of the key questions this morning with the jobs numbers was highlighted earlier -- how long can we create 250,000 jobs in an environment where corporate profits are under pressure and productivity has been abysmal? i think this is an important question. we think it can persist for quite some time. graduallyh wages are
taking higher and profits are under pressure, it is not because we are seeing a substantial uptick in wage pressure. it is really because of the revenue side. we have seen energy prices fall. we have seen the dollar hit troughs in that perspective. we still think there is not underlying pressure from the wayside. because the labor pressure is still low, we think there's demand for labor out there. that spread between gdp and payrolls is a bit of conundrum for a lot of economists. let's have a look. carl here's a chart that put together showing real gdp at three quarter annualized change. you can see it has come down to a level that we have not seen since 2013. nonfarm payrolls -- we all know this graph pretty well. it is basically 12 month average at 225. megan: i want to come back with this question we put to howard ward earlier, but what about be
insistent of keeping june on the table? tom: they have a public duty to provide stability. guess what? they are not in control and did not know what they are doing and it's out there. if goldman sachs has three rate increases beginning in june for and francisco in london reaffirm that believe, it may change at 8:31 a.m. this morning. your good question as they think they are in control based on the data. at 8:30 a.m. and don't forward into the june meeting. david: wages are picking up. tom: this is the heart of the debate. where's the wage increase? david: when we talk about this uncertainty, you say it's the unknowable. how much of that is because we have essentially turned and love of the markets over to essentially three central banks? we used to have a market widely dispersed.
now we basically have three people who can really drive the markets. emanuella: i think there is some truth to that. all the central bank communication is probably over information. markets have to be able to think on their own and come to the own conclusions. there is definitely informational value from having that communication. markets andtime, investors and analysts and economists have to look at the data themselves and focus on the conclusions there. jonathan: we have had a fundamental shift. these three central banks used to be the source of stability. they are the source of volatility right now. if you look at the volatility we looked at yesterday and the fx market, the very idea that g7 fx fxatility is now above volatility, there's a message in the bottle. the japanese yen is now more volatile than the indian rupee. historically, that does not hold true. and that has shift
come about from a central bank that has taken things too far, too soon, too quick, and a market that does not have a clue what the central banks are doing anymore. emanuella: i do not want to blame central banks. we need to focus on the data and not the central banks because much. that is where the changes need to come -- analyzing the data that says where the economy is and so the parsing every verb and noun of central-bank speeches. tom: bank of america merrill lynch has a 1.8% on gdp. emanuella: 1.7%. tom: you are gloomier than i thought. [laughter] what i see here is a political calculation into this. it is absolutely unthinkable given the jobs report today that washington can allow a 1.7% gdp to be the run rate. it is just unthinkable. megan: that's because of the ultimate uncertainty -- donald trump, even saying he would replace janet yellin.
tom: i hear jonathan is on his short list. [laughter] david: more important than saying he replaces her, he says why -- because she's not a republican. tom: i will go to the politics of the fed. there are republican economists like jon taylor, the extremely competent economist from stanford university. glenn hubbard, the dean of columbia business school, is associated with the tone you would see from mr. trump. i would go back to sergio of ati and this idea cacophony of macro events leading to this jobs report. this is one of the oddest jobs report we are running to. jonathan: it has crept up on us. tom: you were on bloomberg radio? jonathan: at 4:00 a.m. for some reason. not some investor with a
short-term time horizon. that has a fundamental feedthrough into trade and growth. when you look at the ubs numbers, it was then's like advisory. -- things like advisory. very wealthy people that sat back and said i do not want to go there. that shows you that that volatility goes right into the real economy. when prime minister shinzo abe spoke yesterday, he was talking about addressing the fx volatility in the g7. good luck to them. tom: at the end of the day, i'm sure you have dealt with your fx people all week. almost three standard deviations in euro, almost two standard deviations in the end. these are brutal moves. emanuella: i think it is a question of confidence. we are eight years out of the recession and we keep talking about recovery. we should be talking about expansion and does not feel like that. the one area that has really been leading the charge has been the jobs data in the u.s., the consumer data. a little bit shaky more recently, but the income data associated with that will be extremisely strong.
i think we need a data point. megan: what is going to be the data point? we will only see a minimal jump in growth. and wage growth -- we have not seen it. emanuella: we need a strong jobs number. weights pressure is relatively moderate, i think that is fine. meansng uptick in jobs the labor market is so strong that it is drawing individuals back into the job market. that is what we need right now. we use that excess capacity and hidden slack and we will eventually get to the point where we are pressing up against that productive capacity. that is when wages start to kick off. at that point, we need to start worrying. we need to start hiking faster and start pricing in. jonathan: we will leave it there. tom keene, job guess please?
its doors and allowed a visit from foreign journalists as its workers party hold its first meeting in 30 years. it will give kim jong-un a platform to lay out his agenda for the party leadership. for a closer look, we bring tom mackenzie. give us a sense of why this is particularly important and what you expect from it. tom: hello from pyongyang. we went to where the congress is being held earlier this morning with thousands of delegates across the country are gathering. we expect kim jong-un to be addressing them. as far as we got was outside that congress. we have not been allowed in. we are waiting for news and being able to give access. the economy is being watched. there is a great market that has developed over the last few years. cars on the road and buildings going up and bottles of johnny walker in supermarkets
here. can that market before and was somehow? will the congress give that their blessing? david: what does it say about kim jong-un's sent up on security that he is want to have this own congress now. ? last time, it was 1980 when his father was designated the h eir. was military-il first. he never held one could 1980 is when he was involved. he took over 14 years later. kim jong-un is making the party center again. this is about controlling and shoring up his support. party to douse the that and use the congress to send a strong message to the people north korea and more so to the outside world. looking for to be noise and signals from them
about their nuclear policies and any overtures to china, their import an ally. reaction has been fractured somewhat by the nuclear tests that we have seen over the last two months. megan: how much access are you getting actually to this? how much are you being allowed behind tab access and see what's going on? tom: everything we do is very heavily monitored. we have monitors, one for each designated journalist. we are taken from venue to venue and not told one certain things will happen. we were taken to a farm and him all and that is where we so the johnnie walker and tv sets with regular people going about their shopping. farmers are now allowed to keep up to 30% of what they have produced. they can sell that on the open market. we have been taken to military sites where they talked about their historic military legacies.
everything is basically control. we were hoping to get to the congress today. outside the building was the closest we got. david: thank you so much, tom mackenzie in pyongyang. as you know, this regime is full of symbolism. they do not do anything without symbolism are the for their own population or externally to the world. megan: tell us about your visit. david: it was the strangest place i've ever been in my life. i was there for a week at one point. it is so tightly controlled and people do not know what's going on in the outside world. they have such a sense of purpose of being this embattled north korea versus the rest of the world basically. megan: what's interesting is this great market developing. you hear stories about shop setting up and that sellers are not strictly for britain. is that something that you see growing? past: just drive from
history, you saw that happen in the soviet union as he got into the 1970's and 1980's. there was a little bit of free commerce for the people. it is a country that has had starvation and it has been really terrible there for their liberalizing -- and their liberalizing a little bit. jonathan: how do you reconcile those things? david: nothing else matters except kim jong-un. he is really in charge. it is all about him and what he is thinking. i'm sure that he feels some need to get a foreign congress going because he needs real cash. they've always been very cash-strapped to run their regime. the other thing i wonder about is china. they are so dependent on china. china is sending some messages, they like to open up a little bit. jonathan: that is quite the assignment for bloomberg's tom mackenzie. let's get you your business flash.
general motors is teaming up test selfto driving taxis. the move is a challenge to both google and whuber. they will test chevy volt taxes on public roads. prosecutors are widening their investigation into credits weeks and one of its former wealth managers . prosecutors have identified three more former employees as suspects in an unauthorized trading case. it involves the accounts of rich eastern europeans. you may soon be hearing what was once known as muzak in your local mcdonald's. a startup backed by spotify has reached a deal to type background music into as many as 30,000 mcdonald's restaurants in the world. it is the first foothold for a company called soundtrack outside of the nordic region.
megan: welcome back to "bloomberg ." i'm here with matt miller for off the charts. jobs day is the biggest day since last jobs day. matt: it is a huge job day. you were not here yesterday and carol massar was standing in and she beat me in battle of the charts with something. megan: carol had a chart? matt: yes, but here's the chart that i had that really should've won. emerging market volatility over the last two years has usually been higher than g7 currency volatility. that is because traders were kind of freaked out and did not
know what was going on in emerging markets. that makes a lot of sense. a lot of traders cannot get the information well connected to emerging markets, but they did have a lot of faith in their forecast for g7 currencies. what we have seen now is that turned on its head. lessrs have no idea or than idea of what is going to happen in g7 currencies. the volatility is so crazy with the dollar and yen and euro that they are more sure about emerging markets than about g7. megan: that says a lot about central banking indication. matt: that is exactly what the problem is. communication and policy and the effects thereof. let's take a look at the next chart. dollar --chart of the the bloomberg dollar index i believe. and why, you see the two-year treasury yield. here, you see the dollar index.
the dollar has gotten absolutely crushed at the beginning of the year, but we have seen a huge turnaround in the last week. the dollar is coming back and ever closer. this is very interesting because what this shows you is that traders in currencies believe that the jobs number we're going to get today may show enough strength that the fed could have the firepower to raise rates again. futures, we are not seeing andy indicatio any indic. i will type in w.a.r.. rip and there's only a 10% chance of a hike. traders only see a 50% chance of a hike february next year. if you go back to that chart and look again at the dollar jumped here, it looks like traders and fx think that there is a more likely chance that we will get a strong number. megan: what is your number for today?
what number do you think we will see to put june back on the table? matt: i picked 172,000 and what to be as close as i can without going over. most of the economist that i've talked with today -- and i'm going to speak about this in the next half hour -- i really looking at numbers closer to 210,000. i'm seeing guesses of higher than 200,000. david: i'm going to change my vote from yesterday. we are now 30 mins away from the jobs report. coming up, alan krueger and bill gross will be joining us on "bloomberg ." ♪
bill: press reaction from gross on what the numbers mean for janet yellen. ♪ david: welcome to the second hour of "bloomberg ." david westin here with jonathan ferro and megan murphy. megan: it's about jobs and whether it will spur the fed to move the needle in june. let us get right to markets. jonathan: 90 minutes away from the open here in new york city, features are down negative five on the s&p 500. for thex 600 heading biggest week of losses since february. in ugly week for the bowls in europe. here's your state of play ahead of the report. yields unchanged.
all attention on that front and of the yield curve. they have been grinding lower to the 73 basis points mark. and 1.5 percent to $43 $.68. let's get some stocks, matt miller. matt: let us look at the equity movers. gopro and square down -- having nothing to do with the jobs number but following the trend that we have seen in the tech results. square is taking a hit on concerns of its financing for small business customer loan program. it was viewed as a growth area for square. gopro reporting a loss after posting a profit in the same quarter last year. it's highly anticipated drone karma will not make the initial release date. to the on us, analysts are not very optimistic about it anyway. gopro shares are down 80% over the past year. this is just another nail in the coffin.
moving to a winner, yelp is getting good reviews on its quarterly performance after sales and profit of topped estimates. it saw a 1.2 million rise in mobile app users. a much-needed boost for yelp, which has already lost a quarter of its value so far this year today. finally, check out and out and cigna. shares down, plunging ahead of the open this morning, down by almost a third. they reduced twice 16 guidance and made changes to its board in leadership. cigna is trading unchanged there. they have not change the outlook, so what's the stock more as it moves up in volume. jonathan: counting down to the payrolls report, the latest reading on the u.s. economy is just a minute. 200,000 jobs expected to be created last month. there are two go-to guy's to get a read on the u.s. labor market coul.
one is alan krueger and the other is bloomberg intelligence chief economist carl riccadonna. carl, 30 minutes time. l: normally economists are trying to be clever on the analysis for the report. they say to look beneath the surface, but not so this time. the economy has been in this extended deceleration. last year, we were going 3.9%. we slowed to 2% and then last quarter, 0.5%. the check engine light has come on for the economy. in themakers held out fed meeting statement that strong income growth would lift us out of this soft patch as consumers engaged. for that to happen, we need to see solid hiring. pay less attention to the unemployment rates, earnings growth, although some details. we just need to see 200,000 or better.
if we are significantly below 200,000, we have a real problem. jonathan: we do not even have to sound smart. just look at the headlines. say it,ry rarely will i but in this circumstance, i think that's the case. jonathan: two economy similar in the past have been the u.s. and u.k.. so the u.s., do you think we're going through a bit of a soft patch at the moment? alan: i'm a little skeptical. in the job market, there's been pretty steady expansion. i think the job numbers are more gdp.tant tha i would make it 100,000 rather than 200,000. those numbers get moved around in the revision could be 50,000 or 60,000. i would not be surprised if we see job growth start to moderate given where we are in the unemployment rate. all the other indicators on the
job market are pretty solid. i would give a little bit of a past even if the number is as low as 120,000 today. says not toif carl look under the hood, let's look under the hood a little bit on wage growth. do you actually think we are seeing more people enter the labor force? how closely should we watch that and how much pressure that is putting on wage growth? alan: i am a labor economist, so i watch it very closely. we have seen a bit of a rebound in the labor force participation rate, so that's important to watch. i would be surprised if that continues at the same rate that we have seen, but we have also seen wages edging up. goldman sachs had it report it couple days ago suggesting we are seeing a gradual acceleration and wages. the wage number today will be important. david: i want to look under the hood in a different place, which is the average number of hours worked per week. i'm going to use karl's note
from last night and he will have another chance to defend himself and a second. in his note, he has a statistic that 1/10 of an hour difference is equivalent of 350,000 jobs. if that is right, you can wipe out two-putted thousand jobs in a second by going down 1/10 or in reverse double. alan: this shows that carl got a very good education at princeton university. [laughter] we got ours measures from two different service -- the payroll survey and the household survey. it looked to me like ours are back to where they were before the recession if you take into account the gradual downward trend that we have had in work hours. there may be a little bit of hidden slack in terms of too many people working part-time that want to be full-time. that is what we get from the household survey. you are absolutely right. the aggregate hours, a statistic that the bureau of labor statistics reports that does not get all much attention, is probably the key for predicting economic growth. alan: i would say that is the
second-most in pointing to watch today. by myill standing statement that the headline is all that matters. necessary toon lift us out of the soft patch depends on the rebound in aggregate hours. that is the second most important thing and that tells you about income growth down the road, which will help us. still, that headline number, even though an our ship could offset that, the headline number -- if we have a big miss in hiring, that tells you that hiring managers have lost confidence in the economy may be because we are growing slowly, maybe because corporate profits are down 8% relative to where they were last year. that would reflect a loss of confidence that could then turn into a drop into aggregate hours worked. megan: how badly with the market respond to 100,000? there is no way this market is ready for 100,000. alan: they are not ready for
100,000. carl: let us say we are 50,000 above the consensus and we say things look good and the economy will be fine and the fed is still in play this year. 200,000 is the consensus. i would say my drop off point is 150,000. if we are below 150,000, the market has to really evaluate. the next opportunity greater than 50% for a rate increases the february meeting of next year. the market is when to push that out even further and possibly start to anticipate a rate cut from the fed if we see something closer to 100,000. megan: what do you think people start to price in 150,000 as to what we should be expecting and that is a good thing not about think? that thing? carl: i do agree that we will see a slower pace of hiring, but that does not happen until we start to see more evidence of which pressure. if we are stuck in the same old
2.5% range for wage growth, than i do not think that will justify the slowdown. the argument is that as labor gets more expensive, you will hire fewer workers to do the job. it also fixes our productivity problem by the way. alan: i'm a little bit more optimistic about this because we are getting close to full employment. given our demographics today and the age of the baby boomers, i think we are going to around 150,000 as still a healthy jobs number, and when that we can tune used -- one that continues to bring it down. carl riccadonna and alan krueger, thank you so much. putting our first quarter monetary policy if limitation report. the pboc is trying to find tune monetary policy at the appropriate time to maintain mid
to high speed growth. downward pressure still exist. we will bring you more on that in just a moment. in 30 mins time, bill gross joins us to help make sense of this month jobs report as we count you down to payrolls just 20 minutes away. matt: here's a check of bloomberg first word news. it was an extra ornate involving the likely republican candidate for president and the republican leader of the house. paul ryan says he is not ready to support donald trump yet. in ryan's words, "i'm just not there right now." donald trump fired back, saying he is not ready to support ryan's agenda. trump has one of the richest republicans in his corner. sheldon adelson tells "the new york times" he will be backing trump. he has donated millions of dollars to republican candidates in the past. wildfires in western canada has spread to an area bigger than new york city. the numbers are staggering.
more than 80,000 people have -- forte mcmurray mcmurray and the fire may be the costliest catastrophe in canada's history. insurance losses may be more than $7 billion. it is forced oil sands producers to cut off their output by more than 40%. i'm matt miller, megan. megan: we are less than 30 mins away from the u.s. jobs data. 200,000 jobs expected in april. we have will have full coverage of the report, including bill gross, just ahead. ♪
let's get to matt miller with analyst calls. matt: i do not have analyst calls, but i've projections from economist. a cal we sat down yesterday with neil grossman and he roger hedge fund now -- runs a hedge fund now and he is looking at the average over the last 12 months. this pink line is the average. we are looking at 225,000 for the average number. he expects to 20,000 this month. i've heard the same thing from john furman. the economist that i am talking to our admittedly fairly economist, but they said to look at the numbers at 220,000. the labor market could not be any better. t ellipsesee do
between everywhere. most economists do not expect the jobs numbers to stay this high. , whetherit seems bearish or bullish, says they need the numbers to come off a little bit. even that they are looking for a 200 plus number this month, they think it will fall down to 150,000 because it cannot be sustained of these levels. alan: that is a before picture. if you look at the pink line, look at how smooth it is. itt: a lot of the economist talked to, stability is what they pointed out. even if we see wage growth that only 2.5%, that is good in the long run. when you get a jump in wage growth, that is the end of the business cycle. alan: i would not seeing it a jump in wage growth. [laughter] jonathan: is this as good as it gets? alan: i think they can get
better. we can see it down to 4.0%. i would not be surprise if it happens over the next year and a half. jonathan: let's get into that -- the non-accelerating inflation rate of unemployment. 4%? alan: no, i think we may get a little bit below it, but we could tolerate inflation going up to 2.5%. i think we could see it above 2%. i think will be sustainable for the employment rate -- unemployment rate to continue to drop. jonathan: the treasury market does not seem to be ready for that at all. do you see that? alan: i'm more optimistic than the markets and that is true for a lot of economist. matt said exactly what i said. growth toand limit moderate around 150,000 a month because reagan close the full employment. that is not what the markets are pricing in.
the markets tend to overreact to the numbers. if we have a very low number, i would not be surprised the markets do overreact to this. david: we have with us professor of economics at princeton university alan krueger. i want to talk about how we are creating these jobs. it turns out that a lot of the jobs come from a point of what you call alternative work arrangements, which have grown dramatically. alternativethese work arrangements? alan: larry katz of harvard and i administer the continued worker survey. it's a survey that the bureau of labor statistics has done but not for decades. we conducted the survey's ourselves and what we found is that the fraction of workers who are in contract positions or temporary help jobs or freelancing rose from about 10% of the workforce to just over 50% of the workforce over the last decade. david: that's like a 60% increase. fact, total job growth
over the last decade was 9.1 million jobs. growth in this alternative work sector was 9.4 million jobs. it counts for the whole growth over the decade. , we havelast six years added 14 million payroll jobs. i think the future is brighter over the last six years. if you look at the longer term trend, all the growth it appears has been in freelancing of positions. david: i want to bring back matt miller. matt: you go ahead. david: no, go ahead. here.i have jolts we see job openings in white and quids and blue. we saw an interesting phenomenon when job openings went above hires. s came up a little bit
and that has to be good news actually. we are not going to get to the levels before the recession. that is not what you want. you want slow and steady wins the race stable growth, don't you? alan: i think that is where we are headed. i think we have seen the gradual healing and the labor market over the last six years and i think that is sustainable. i've often said that it will not be the strong as recovery on record but it could be the longest. highlighted is what could lead it to be the longest. megan: let us talk about the gig economy, often referred to as we were drivers. it is also construction workers. how does this fundamentally shift the dynamics of the entire spectrum from health care providers to how employees structure their work for people? is there risk that these people have a retirement time bomb that they are not in the normal system will work as we know it? alan: the get economy is
actually a small part of this. we expect that half of the workforce is finding work through an online intermediary like uber. cooper has been doubling its drivers every six months in the u.s. even more important is the number of people freelancing off-line or the people working through a contract firm, like a janitor or security guard or doing payroll and security services. about ourquestions safety net because it is provided the regular traditional employment. affordable care act will make it easier for freelancers to get health insurance coverage, i think we need to do more to make it possible and easier for people say for their retirement. that is what worries me the most. so many workers in the segment of the economy are not saving enough. they are not prepared for a rainy day.
jonathan: this is "bloomberg ." i'm jonathan ferro counting you down to payrolls. 200 k is expected from the median economist. futures off by 39 points. negative five on the s&p 500. this is how the fx market is shaping up. the euro-dollar at 11426. the market got a little bit nervous up there and were treated with a stronger dollar
on the back of it. for today's morning meeting, i want to bring in the jeffries managing director of fx. make of theo you volatility we have seen so far this week? we have had a big discussion this week, but what do you think is behind in your mind? brad: the reversals nothing more than just a position adjustment. the fed was not as hawkish is some thought it might be in the last meeting and the dollar sold off rather aggressively. we got a little far too fast earlier in the week with the dollar they sickly off against everything across the board. the past couple of days has been a little bit of a good back and position adjustment with some profit taking as we head into today's number. jonathan: he agrees with you and ask is more about traits going off been going on. i think of one single conviction trade at the moment in the g7 space. ande going to the payrolls
beyond, what is the conviction trade at the moment? brad: it's a very tough call. it is not easy situation. i think the yen and the euro are going to remain rather good. i think the dollars want to have a hard time rallying unless we get a really big print today and a couple of other big prints down the road, but the dollar's want to have a hard time really gaining any legs or traction. the yen will remain rather strong. maybe not through 105. the boj will get nervous if we get down there. the euro is going to remain big despite what popular opinion what happened lower. applicable holding their rather well. -- i think it will hold him rather well. i do think the yen and euro going to remain good in the dollar will remain soffer now. payrolls,going into maybe people rethink what they expect to happen in the june fed meeting. what i see is a breakdown of the narrative of the last couple of months. does that redevelop or does that narrative break down even more?
brad: if we get a big number, we need a big enough tea combined with average hourly earnings coming in at 0.3 or better. if we get that, nation, maybe that helps the divergent monetary policy narrative a little bit. at the margin, it is going to take more than that to get people back into that view. the fed seems to be willing to let things run a little hot. one day the print is not going to let them change their mind at all. obviously we have the brexit coming up in june as well. it will be hard for people to get their head around the fed hiking at june. it will take more than one day for print together. jonathan: at this point, i'm looking at the two-year notes. i'm looking at real yields negative in the u.s.. this contribution real dollar softness over the last couple months. regardless of what the number is in four minutes time, do you think that stays intact? brad: absolutely. real yields are the tempo the floor.
breakeven's are coming off this week. much dollarpretty negative. you will have a serious headwind there and i think any dollar rally will be beat on that basis. jonathan: long short the dollar into the number three minutes away? brad: i would probably be long on the dollar and a temporary basis. jonathan: brad, great to have you with us. alan krueger, this 300 k number that could recalibrate expectations for june, every single conversation around this payroll november has been one data point. alan: it's an important data report, but i think the fed will have another meeting before the june meeting . if the fed is going to act in june, i think they will signal it very soon.
david: as you anticipate the number, whatever it is, to what extent you take into account corporate earnings, which are down? alan: i think they are down because we are seeing which is rebound. i think that's an inevitable part of the recovery. it is that is a sign of getting a little harder to hire workers and many companies have to pay more. we are seeing a other rebalance in terms of profit share in lead and labor share. that does not worry me too much in the current labor environment. megan: allen said the most nerve-racking minutes were forgiving the white house number right now. what you think jason furman is want to be looking for this morning? what does he need to see to continue this message of growth? alan: he will look at it the same way as i mentioned earlier. the pink line that matt showed earlier, i used to show that when i worked at the white house to reassure people because that shows growth averaging around
200 point thousand jobs a month for the last five years. riod, there was a zero. people panicked and it got revised up. if you look at the big picture, we were expanding on about the same pace. i think it is important to look through the month-to-month fluctuations, although that is hard with the pressure of the press and the markets to take that longer-term perspective. jonathan: we are about 50 seconds away. pleasure guess -- what is your guess? alan: around 185,000. jonathan: just to look through the estimates for you, 5% unemployment previously. the median estimate is 4.9%. the biggest for you. his average weekly earnings. 2.3%,n your, previously percent.y is 2.4
futures are little bit soft going into the number. futures down by 34 points on the the 500. the payroll report is coming up, right here right now with erik schatzker. 160,000 jobs created in the month of april, it is the weakest job creation since september of 2015, it is 40,000 jobs a low of the median estimate. anticipatedt, who job growth of 200,000. we had negative revisions of 19,000 for the previous two months. the net increase is 141,000 jobs. fell --ployment rate held steady. it was an unexpectedly large number.
it was the most since september 2015. that brought the labor participation rate down from a rating of 63% in the month of march. as you know, data as a sign that the labor market is flattening and not weakening. also, we saw an unexpectedly large increase in the number of people filing for jobless benefits. it is a disappointing number on a private payroll. on the plus side, let's talk about wage inflation. there is some here. we had average hourly earnings up 2.5%. they are matching the highest rating for the year, and also increase hourly earnings for the month of march. there was also an improvement in two months by the fed. the number of people working part-time is down this month, and the underemployment rate has
also declined since 9.7%. that is the first reading on april jobs report. david: do you have the average? erik: 4.5. john: i want to go through market reaction. things like the trading on the myth, we had the 150 survey. let's get a hearing on the treasury curve. 69 basis points. we had a rollover at the market. $60 --ld see we are at 69 basis points. we went through the fx market for you. even though wage growth comes in at 2.5%, we looking at 2.4%. the headline myth seems to be driving markets in the short term. afterwards, what you see is a stronger japanese yen.
we had a 10 year yield down for basis points and a bond market getting interesting. one man, who i know will be interested about this. we have bill gross on today's job report. the miss on the headline number with treasuries. tom: michael mckean and tom keene here. today, we have jim glass. and have alan krueger. all,ross, first of congratulations on the philanthropy of selling the swiss stamp collection. why did you sell your stamp collection? it was to frank. well, i have been selling it for nine years. once you fill in all the spaces, it's time to move on. i have been letting it go for charity. did you sell the stamp with
the upside down airplane? never. i would never sell the inverted jenny. you have that reaction to the jobs numbers we were talking to jim about? the market will decide on june. for the last three minutes, the market has decided that jim is out. the fed, has a global central bank. they are fixated on stock prices. they are moving into the extent that the stock market home, i am not sure that june is out. we had that from stan fisher. we are with williams at san francisco. they all seem to get it.
they know that some point, they are raising interest rates. movements of profitability and insurance companies. in your most recent economic letter, you said you will see qe4. you are not convinced that they will be raising rates. bill: i think they should, and order to give a break at the bank. but, at the same time, i think the fed has to support the long bond market. this has to be a very delicate process. there cannot be a lot of volatility. i think that qe has to come back at some point, if only to provide funds for fiscal spending. are talking about helicopter mining in milton
friedman, and ben bernanke dropping cash from helicopters, what they're really talking about is that this spending is being paid for. it is not very easily done. it is more easily done that in the private market. tom: we need to mention the markets right here. the two year yield has moved dramatically. i just put out on twitter and on bloomberg radio plus that the two-year chart is well over standard deviations of a lower yield than the trend that the fed has seen for a good 18 months. you do see these knee-jerk reactions. correctly for the two year yield, or will it come back? think .68% is at the low
end of the range. it will go that way for the last 6-12 month. and, if it does increase through june, you're talking about a federal funds level. so, i do not think it is appropriately priced. with what the fed has done, they suggest they are data independent. this is the data they have used to support a lack of a hike. we are also seeing wages move up by .3%. i think yelling, more than jobs is focused on wages. tom: let me bring in the discussion of helicopter money. bernanke talked about inflation in japan over 10 years ago. olivier talked about the bond chart over six years ago. why is bill gross talking about
inflation? why is this so hard get go -- hard? bill: more than anywhere else in the world, aside from type one, we do not have the same age problem which leads to less demand going forward. so, japan is not a typical petri dish. what is necessary in the united states is fiscal spending. to be fair, the fed talk about fiscal spending. you know, with respect to the congressman, i think we need to try tooney, but we figure out how to elect a president going forward. andastructure, health care, spending on a universal basic income which is 5-10 years in the future.
support an increasing jobless element in u.s. society. we are seeing a reaction to the dollar. it is down by one quarter of 1%. the yen is gaining. the euro is gaining. are you concerned about the u.s. impact on the rest of the world? markets impact the rest of the world. the central bank has not done anything yet. it is impacting everyone's economy. does, and it currencies arctic mover in the united states. it is part of a hedge fund portfolio. that is to the extent that hedge funds are on the wrong side of the right light of the movement and currency. then, they just other metrics such as bond duration or risk equity. once you get something moving in a high leverage market, you see
movement and other aspects, even though, the jobs report seems to divergence than what was expected, but not very significant. how will you adjust your bond portfolio off of what we observed today? and come off of the lethargy of the american economy we have seen in the data over the last x months? would you have to do is recognize that the fed and other central banks will stay low for a long time. we have standard deviation on a traditional day for the two-year. is that does mean investors and savers will be impressed and that interest rates will stay low despite an increase by the central bank? coming up, of course, bill gross sticking with bloomberg television and radio. that is coming up. his reaction continues with the jobs report.
payroll report, the headline number was disappointing. it felt 160 with the jobs added last month. 200 kate was the estimate. 4.9% is expected. average earnings are up 2.5% year on year. 2.4% expected. we will get other details and just a moment. for now, i'll get initial market reaction from matt miller. matt: let's look at what markets are doing. you can see futures are down half a percent. we had a strong movement down. we talk about what the future market looks like as far as the forecasting movement. we are talking about a fed increase in june. i was talking to you about it. this shows that the chart form just drops. it is down by 2%. so, the market, is updated every
10 minutes, then knee-jerk reaction was a drop there. let's take a look at the reaction in treasuries. here, we have a big drop down. investors are selling off a little bit. the two-year looks very similar. the front end of the curve is more affected. they were this far off from the meeting that you not see. the story we have been focusing here so much of it was a jumped up to 116. move the market made a that the judgment call briefly. before you read the details, the more solid the report becomes. it is 160,000 job growth.
john: everyone just caught their breath quickly. the job report comes down to 200 k. we go to bill gross. tom: we are looking at the knock-down effects of this challenge. though, i spoke at length with bloomberg. what a wonderful event. of course, he was played by steve carell and the big short. areas adamant that you
supporting of lower for longer. if bond prices go up and up, fullis suggesting a 1.50% credit 10 year yield. how do you position yourself with the new realization of lower for longer? bill: it is not that complicated. if you take the position of 1.5% on the 10 year, which is something i will do for the next 6-12 months, then, would you realize is that there is not much of a capital gain in the 10 year. but, there can be a substantial yield. you can position yourself in terms of selling that range. we have the call in options going up 6-7%. it is complicated. but, it is a key position and a
key tenet for investors. they will go to the next several years at least. the central banks maintain a relatively tight range in terms of yields. byy go through that not buying bonds. we sell the volatility around it. with the riskthat of course. it is 101%. it is not a good strategy. we go through that unconstrained. tom: we are looking at the tips yields, don't quite a little bit. we are at nine basis points. it is up .6%. the bond market has no inflation out there. even though we are at 2.5% for your over your rages.
we will go up 1.65%. it is incredible. we're down 1.6%. that is in from janet yellen and the company want. expressing an inability for these rates going forward. policy donefiscal in by the helicopter one. let me explain helicopter money for second. qe, we have treasuries and mortgages. all we do is that we take the interest and go back to the government. we go through that as long as this ponzi scheme keeps going. i think it will.
it is not a burden in terms of debt to the bond market, it is debt in terms of the fed. the fed and the treasury are becoming conjoined in terms of fiscal or monetary policy. that is unless they have independence. going forward, will have to put up with the combination of fiscal and monetary policy that we see in japan. we'll see more of that through the united states. tom: could that be sold to the bond market without a volatile reaction? the fed is moving short-term rates up to provide some semblance of the money savers. the short-term portion of the yield curve, if they could combine tens and 30's with a quantitative effect, we have the volatility going forward. is applied to fiscal policy. we can get the economy going again. one of the amazing things is that we are all changing now.
you know, basically, the supply remains moving forward. the policy news goes back and becomes demand-side policy because the aggregate demand on the global basis is lacking and, most governments have not figured that out yet. you have done a great job of bringing it into the economy. we have the molding economy. one of the outcomes of that is the negative interest rate. what do you know about the use and efficacy of the interest rates for the last few times." -- times? we are moving in the euro-dollar. how do negative rates play out? bill: they have been playing out. not only with banking, but also as pension funds.
we have these situations in puerto rico and detroit, we blame those on individual access in terms of spending, but, basically, all savers and pension funds in the united states are in a situation where, if they cannot earn 6-7%, they cannot get a positive return on they become more unfunded and they dig a deeper and deeper hole. negative interest rates are not the way to go. they are a huge disaster. they do not help economies. in: what are you looking to order to pull us away from a negative interest rate policy prescription. what action are you looking for our say ok, we're done with that model? bill: central banks should give up on the phelps curve. 2% real rate of interest. they should start moving towards
that is opposed to moving in the opposite direction. yes, in orderme, to prevent a downdraft in the equity market and long-term bond market, we should support the phase. to me, monetary policies have to reverse this course. fiscal policy has to get off of the dying. we have to start spending some money for jobs, for infrastructure, for health care. there are trillions of dollars we still on a supply-side and a deficit cut in. that is going through the global basis. that was bill gross of janet capital on bloomberg radio with michael mckean and tom keene. very quickly, what a situation we have with this kind of wage growth and a 10 year yield. defined remarkable?
it is the sweet spot given were the -- would you take a 5% unemployment rate? it is a picture of the economy go on, wend as we will recover a lot more from the great recession. david: do we need to worry about inflation? john: there is some risk. david: we will talk more about that. we have more on april jobs report. furman, but it's coming up on bloomberg go. ♪
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president's council, jason furman. john: commodities are unable market. city says yes, goldman says no. david: we are 30 minutes from the opening bell. this is bloomberg go. i'm with megan murphy and jonathan ferro. john: 30 minutes after the the labor market gets dumped some of the markets jump around 30 minutes later. points on the dow. futures are negative. we switch up the board quickly. we have interesting is from the treasury market. , it with 2.5% wage growth
was a disappointing headline number that seems to be driving yields down taking june off of the table for a fed hike. yeard a yield on the 10 down by a couple of basis points. about one quarter of 1% against the dollar. for more reaction to the latest report, erik schatzker reports us -- joins us. jim a coffin -- jim macaw been -- economics professor jason furman. seems on the headline number, do these suggest otherwise." -- otherwise? had the week's job growth since september 2015. you would think something is wrong. let's not forget that we are close to full employment with unemployment rates at 5%. what is supposed to happen when we are near full employment? the number of hours worked as
opposed to rise. accelerationwage at least the acceleration of wage inflation is supposed to happen. last month. wages were 2.5% year-over-year. people are working part-time less and less. we are seeing a decline in the unemployment rate. all those things are good. only the headline number looks bad. david: the screen did not show one number. that was the average number worked per week. if you wanted to look and see what is the strongest predictor of gdp growth, you would look at the aggregate function going up when it percent. the drop in the disappointment in the headline number was more than made up by the fact that the work week increases. megan: allen, ontology talk to you about the labor forces. you said you think the slow rise
is actually a false number over the past few minutes. tell us what you need to feel stronger about that. alan: i have seen a slow bounce back. they long-term unemployment is leaving the labor force overtime. are trying to keep them engaged in the labor market with these unemployment benefits. and, that is what we are seen over the last few years. the last six months was a reversal of that. i suspect that was a bit of a blip. today, we saw participation rates drop. long-term unemployment fell. many of those continue to leave the labor force. i believe we are in a time where labor force participation rates are in a holding pattern and will trade down. that is because of the aging population. women who have been feeling the rise have stabilized. the labor force participation rate of women stopped growing around 2001. we need to make the workplace more flexible to get more women
back in the market. david: you're the one investor at the table. it is only 34 minutes or so. how important are these numbers to you go -- you? becausey are important, i think job numbers have worked in a wage rate. those reflect what is going on in the economy. i think there are gdp numbers that are wrong. at the job numbers. i think the number we have just .een is below expectations the market reaction is rational. treasury rates are down a little bit. we come dollar. that makes sense. i do not see $160,000 a week. the range.side of it suggests to me that we are in a sustainable recovery. getting excited about the
worked,in average hours it seems the average five-year is a 34.5. i wonder what it is that the fed wants to see in june? they are not of one mind. on the the hawks committee will look at the wage growth number here, they will look at labor force participation, and we will say we are close to full employment. that labor force participation would bounce back. we are not seeing that. the doves will point to the top line number. i'm not sure they will have much more of a consensus. then, they are looking at wage growth at 2.5%. we have no growth, no inflation. how do you reconcile what is happening in the bond market
with the inflation sector in the u.s. economy? it depends on what they will have or the remainder of the year. i will take the under on that debate. i think we have a steady growth basis with small inflation pressure. one or that you can see two rises in the next year. maybe, in a year it is time for the bond rate to reach five basis points. low ratet is a environment. not a very exciting return. there are other things that will do better. but if you look at a bond portfolio, treasuries are not a bad place to be. megan: we talked about sergio armani and volatility. how much do we see this lower print and what we forecasted in regards to what we have with slow down and volatility?
there are so many issues weighing down when employers look at the next 12-18 months. we saw a slowdown in activity. in commercial real estate that was because volatility slowed down borrowers and made them less key to close down loans. we are seeing that changing. it.le get used to i think it is ironic to hear investment thanks talk about paralyzing volatility. in recent history they have done well with volatility. eric, i want to turn to you. cold is altogether for us. the initial 168 was disappointing. there are other things that are more encouraging. you have been through many job reports. what you take away from this? erik: what we see in april that is different from what we saw in march or february or january is
that job growth is now coming in relatively well-paid industries. businesses and professional services, financial services for example. inlth care, which is average regards to amount of money you make is also putting up numbers. 34 thousand in april, 68,000 for professional services. -- 34,000 in april. most of this was coming in through april. that is not what we saw in april. april is only one month. retail was down 3000. that is the biggest two-year drop. it is a huge gain for retail employment over the last few months. john: thank you for joining us. a special thanks to alan krueger. kaufman, matt miller, we have a turnaround.
they are unchanged. you know these moves, you know this drill. we will look at what is happening. matt: coming back to reality, after people do with these numbers. if you look at s&p futures on my terminal, they dropped as the number came out. they have recovered somewhat. you are seeing the same thing in equities and currencies. we saw that much faster. you're definitely seeing that in debt as well. let's go back to the gopro and square up prices. there are some the equity movers we are watching unrelated to job numbers. we'll keep you up-to-date on the stock market. gopro and square are following the tech earnings trend. that is disappointing. they both posted a loss last year. people are worried about these shares, they aren't you got
crushed in the past 52 weeks. they are down more this morning. square is off 20% with regards to concerns about their financing. this is a service that a lot of people are looking to for growth. look at a winner in the tech face. yelp is getting good reviews after sales and profits. estimates. good review for them. they had a rise in the app users. it is a big boost in the company. endo international is when we are talking about as well. premarket 33% in the after missing on earnings, cutting its 2016 guides. jcp is down after the new york post reported that it
is in danger of missing quarterly estimates citing an internal memo. faced an said pennies expense challenge. it is down 8% to the premarket. david: thank you. we have much more ahead. we'll get the white house reaction to the jobs report. also join us will be jeffrey rosenberg. our chief income strategist. that is coming up. ♪
that is the fewest in four months. that is less than estimates. the job rate held steady. retailers cut the most jobs. construction companies added the fewest positions. talks to said it is in determine whether it is a pyramid skiing. the company said if it is settled, it expects to pay $200 million. the probe began after a shortselling campaign. investors are widening their expansion into the health market. prosecutors have now identified three more former credit sweep employees as it suspects in an unauthorized trading case. that is your latest business flash. david: thank you. technology, it is trade -- changing the workforce.
it is reducing the assets people already own. jim is the ceo at global investors, he spoke at this week's institute global conference. jim, first of all, how big is this? how is it transforming how we keep score? jim: it is only really in the last seven years that we have seen the digitization of the economy. much more efficient use of capital stock. it only just started. we are now starting to see driverless cars. that will have enormous implications on how world capital stock gets used as well as the quality of the product delivered. it is doing several things. we have a big conundrum. how can companies have so much cash yet not invest capital?
maybe, they do not need to. maybe technology is allowing them to get that growth out of the existing capital. to the radical example of airbnb. corporation has one million rooms to rent, that is knowing your capital stock. they did not have to invest. it is bringing in new capital. goings the sort of thing on beneath our noses. we are not really seen it in the adapter. david: historically, when you have this, it leads to increased productivity. we do not see that in the numbers. is it just something that we are measuring wrong? jim: if you will get productivity, the real difficulty, if you can call it that is improved quality. if you think about the car you buy now, it has all kinds of electronics to stop a wreck. the car you bought 15 years ago
did not. that means you do not bump into someone he thinks. you do not have as many cost -- as much cost of repair. megan: there is a chart in your notes -- the example of theerless cars -- that driverless car and the environment could fall as low as $.50 per mile. we look at the rideshare economy . the argument is that it becomes economically unsustainable to have people buy and own their own cars. this is going to be a fundamental shift in the economy. it will happen with hotel rooms and other areas that we cannot even predict. jim: this is what happened with the industrial revolution. sorry to be historical. when you think about railroads, before railroads you are having horse-drawn carriages doing a 20 mile stretch. a huge infrastructure
people looking after the horses, repairing the carriages. suddenly, you have a railroad that can make it hundreds of miles. that is what is going on here. if you cut out some of the employment that is no longer necessary because of technology, you have been created a situation where people have to find something else to do. this will have a dark side. megan: what else will we find for them to do? jim: that is always a tough question. who would have known there would be jobs like web application designers and software engineers. those are significant jobs. they did not exist 10 years ago. i do not think you could note the new jobs would be. understanding all of that, as an investor, what does that tell you to do with your investments? it is suggesting to me that
if you look at the federal reserve, do they believe gdp from the first quarter -- that sounds like an economy that has stalled. market believe the labor ? that suggests a labor market. which do you believe? with my technology deflation argument, i think you believe that over real gdp. i think that makes me optimistic about the potential for u.s. activity and business. david: that is brilliant. please remain with us. john: we are counting down to the market open. check this out. the largest jump on etf wrapping up its worst week on record. details are next. ♪
the treasury in market. we had a sling on the 10 year yield. marketspecific including this, the etf market. the largest high-yield bond. ofy have seen redemptions $2.6 million. i go to one man. our bloomberg intelligence analyst. i will defer to eric on this one. this is some complicated stuff. what i do know is that we have seen a serious outflow from hyg. this is the biggest jump for the etf. seen 2.6-2 .7-2.8 i am seeing in billions of dollars of outflows. this etf washat there before the outflows, it is
a massive story. the mechanics of it boggles the mind. see investmentn grade etf. it is up. a slight drop in the investment. the trend, over the last month has been strong. i am wondering about the mechanics of how this works. and etf is this big money manager. you are trying to buy into it and get lower fees. what happens when $3 billion of outflow hits in three days? largest and -- it is record-breaking by any means. it will break records and have more assets. i refer to this as the hotel hyg. large institutions using it as a temporary parking
place. my colleague nailed half of the story. until are using this new issue comes out. then, they leave it. they will use it like a moat around their portfolio. they will use it in between managers. so, institutions come in and out. the bigger they get, the bigger the flows are. the other half is a sentiment. flow, look at this week's other money commodity as pyd iw m, and it wanted to the gop volatility. that creates fear in the market. you are having all kinds of investors playing the same sandbox. you have to dissect the closures. john: the only person who really knows is the individual who pull the money out. at this point, the narrative always swings to the pessimistic side of things. when you have an asset class in
out of hyg. this happens all the time. it could beck in, around the fed or some fundamentals. it is not unusual. john: it was one of the most read stories on the bloomberg terminal. great to have you with us. our bloomberg intelligence analyst. stick with us, we are counting down until the market opens. we are four minutes away. we had a disappointing payroll report on the market. the dow futures are down 69.6%. the open, here in new york is next. ♪ show me movies with romance.
x1 makes it easy to find what you love. call or go online and switch to x1. only with xfinity. show show me more like this. s. show me "previously watched." what's recommended for me. x1 makes it easy to find what blows you away. call or go online and switch to x1. only with xfinity. jonathan: mrs. bloomberg , i'm jonathan ferro. it is payrolls friday. us,rey rosenberg joining
blackrock strategist. futures ahead of the open, 10 seconds away, the opening bell in new york rings out loudly. dow, down nine points on the s&p 500. ,n europe approaching the close heading for the worst week on the stoxx 600. the biggest weekly drop since february. about 15 or 20 seconds into the open. to matt miller. some big moves initially and now it is all quieting down. matt: you saw the futures. the majors are going to open in a similar way. down about one third of 1%. i have a picture of s&p futures, you can see that phenomenon. , a bigs number hits here dip, and a little of a recovery. you can see that most everything
as far as industry sectors is down. telecoms up, everything else moving down with energy, health care, industrials, financials really at the bottom of that right now. let's take a look at gold because eric balchunas mentioned it and i think it is important. he was talking about flows out of junk into gold but we have pretty much seen flows out of everything into gold. 1280 h writedown's. ounce. -- 1280 per troy safety outside of gold, debt is important to look at. year, you can 10 see investors just hire in and dug into the number a little bit deeper. there is a little bit of a recovery. 10 year, big recovery. you will see the same kind of thing on the two-year. wages up to and a half percent.
slow and steady wins the race. let's take a look at currencies because the divergence has created expectations for stronger dollar, weaker euro. we sell that flipped on its head and we have had weaker dollar, stronger euro, weaker dollar, stronger yen. today we see big strength and then a big dip and a recovery back to levels we saw before the report came out. very interesting across all asset classes. that is why this is one of our favorite days at bloomberg. david: let's continue talking about it. it is april's non-farms payrolls report, one hundred 60,000 jobs were added, unemployment stays at 5%. here is jeffrey rosenberg, black strategist.ef
you are a fixed income guy. if you got this news, how quickly did you parse it? as matt just told us, the markets seem to really react a lot and then they thought better of it. jeffrey: i think the machines are doing the first reaction and the people are still thinking it over. when the people think over and the headline reaction is because you had the disappointment. expectations was 200 on the headline and people had higher expectations. when you look into the details, you see it is not as bad as the headline would otherwise read you -- lead you to believe. support on the payroll growth and the wages is all supportive. i think that is why you are seeing this round tripping and markets. megan: does it take june off the table? jeffrey: june is already off the
table. ishink what the risk was that if you had a strong report, you bring june back in and the problem was that the market had such a low hurdle for any of that happening, that was the bigger potential shift in the market. market, you are seeing, as kind of round tripping. it is late summer or midsummer as possible, because it gives you enough time to see more economic data to bring the fed back into play. david: jim, does this change anything? jim: i think it tells us things have not changed that much and rates will be lower for longer than most people thought only a few weeks ago. i think it is all very exciting for us to talk about will they or won't they in june. the real question is what they will do in the next six to 12 months.
they are basically fairly healthy but not overheating job market and that feels like a good situation. david: jim mccaughan and jeff rosenberg. megan: reaction from the white house, we go to jason furman, chairman of the council of economic advisers. to what waseaction perceived as the headline this. this is a more solid report that initially thought, make the case for us. the most important thing at this stage of the recovery is wage growth and in april we saw wages up 3/10. up at this year wages are 3.2% annual rate. that is what i thought was most important in this report. the unemployment rate stayed low at 5%. we had job growth above what we need to keep the unemployment rate their. themost important thing is
consistency, the 74 straight months of private-sector job growth. megan: do you think we can just no longer continue to add jobs as a rate -- at a rate of 200,000? does this show that we have moved to full employment and the new normal will be around 150,000 or lower? jason: really high rates of monthly job growth are in some senses a function of economic problems. when you have a high unemployment rate that is a problem and it is coming down. that leads to faster job growth. when you have a lower them -- unemployment rate you are not going to get the same rate of job growth because you do not need it. you need about 80,000 jobs a month to break even with the unemployment rate. i think we will be well above that, but we do not need as many jobs as we needed a few years ago, given where we are now. megan: let's talk about the
labor force participation rate which kicked down this month. how much is this a matter of demographics? we you still concerned that have people dropping out of the labor force altogether? jason: it is up a little bit in the past six months. it is roughly stable in the last two and half years has two things are happening. demographic forces, reticular leave the retirement home is bringing down the labor force participation rate, but people are feeling better about the economy and coming back into the job market. if you look at the people who are unemployed right now, it is much more re-entrance and we have seen before, much more job losers. people are coming back and that is offsetting the retirement. they are on average canceling out. jim: jason, it's true that we
have seen better labor force petition patient rights in older people although it stalled a bit increasing for women. doesn't this point to a need for some structural change in the labor market to facilitate higher labor force participation by women, and to make retirement more flexible so that people at older ages have more choices as to jobs? are things that can be done to improve that structural flexibility? jason: i think you are asking exactly the right question. labor participation issues are less about this business cycle and more about long-standing structural issues in the economy . for women primarily but for all workplaces,ible paid leave, subsidies for child care, all of that would help. having unemployment insurance the better designed to help people search for jobs, introducing wage insurance for
people to get into jobs and compensate them for lost income when switching for a new job, a whole range of ideas like that. finally, education. megan: thank you so much, jason. chairman of the council of economic advisers. jonathan: citigroup believes the commodities slumped is over but other banks like goldman sachs are not so positive. words to use are no drama, the dow down by 1/10 of 1% and the nasdaq down barely two points. ♪
.att: i am matt miller later today on bloomberg television, mohamed el-erian coming up at 11:00 a.m. eastern. do not miss it. this is bloomberg . i'm david westin with the latest business flash. the german chemical maker has agreed to buy units -- the deal as buyout -- it will increase ebonics exposure to the u.s. -- general motors is teaming up with right hailing service lyft to test a fleet of electric self driving taxis, according to the wall street journal. the g.m.-lyft ownership will test the chevy volt on public roads. you may soon be hearing what was
known as muzak in your local mcdonald's. agreed to pipe background music and 236,000 mcdonald's restaurants around the world. that is the latest business flash. let's head over to matt miller for a look at stocks. matt: let's take a look at some of the stocks that are moving right now. check out shares of russian internet website known as the russian google, downgraded from a neutral to a buy. yandex has outperformed the valuation recently so it is not worth more than $20 a share. check out gopro. now, you know gopro disappointed with earnings. to ad a loss impaired
profit in the year before, and it is not going to put its drone out on time. they are going to miss that. square also disappointed with its small business lending unit down almost 20%. nec yelp actually doing quite better as analysts did like their earnings report. the michalis softness was expected and revenue in vegas rose by 1%. the company said april revenues were better in both regions. look at jcpenney, looking at additional cost cutting measures. they also say the article raises concerns it may be time to air on the side of caution with the stock down 6.6% in early trading. megan: let's see what is moving in the u.s. market. abigail doolittle is standing by.
abigail: a specialty pharmaceutical company offered a 2016 outlook well below estimates. the low end of the prophet range has been reduced by as much as 20% as the generics underperformed. not surprisingly, there was a pretty bearish reaction and they stock has been downgraded to a market perform, saying a turnaround is likely to take longer than it affected in a stock were sellers are crushing the buyers. isther health care stock down more than 50% as an fda panel voted to not approve -- or should notpain drug be approved as an abuse deterrent drug. they have reduced their price targets by more than 65% on a stock that is 30% below its april 13 ipo price. the slump could be
behind us. stabilization and china means most markets have reached their bottoms. the bloomberg commodities market has risen 17%. rosenbergus are jeff and jim a coggin. you, i look at what is happening and i see a weaker dollar driving a lot of this. do you think fundamentals have shifted to justify the run we have had? a big buildupeen in hedge fund and trader positions and commodities. remember spot commodity markets are pretty thin. most commodities exchange hands on long-term contracts so in fairly thin markets, that buildup can move the market. i am skeptical. i i look at fundamentals
think commodities are still basically a supply story. investment, new ways of extracting and growing commodities are making them are plentiful and the market is going to have to take that on board. i think the commodities fundamentals remain quite negative on the supply side. jonathan: i guess you look at the situation from a fixed income perspective and every time we get this push up in crude and commodities, yields take higher as well. is that going to break down anytime soon? jeffrey: i think there is a lot of correlation at the macro level. commodities, it is a lot about the demand side, particularly the speculate of flows are a fish that is a big reason -- that is a big reason for why you saw the uptake in iron ore and rebar. jim,nk in agreement with
we have got to be a little bit cautious about whether the long-term supply demand fundamentals are supportive of that. you arenergy side, seeing better news in terms of the supply reaction starting to show up, but for the fixed income market the issue is not really whether we are at a bottom but that the past market expectations that prices would always be high and increasing, that has fundamentally been broken. we have to deal with in the fixed income markets the aftermath. we are talking about reducing supply and that meets reducing capacity, and you have real credit issues when you reduce capacity. david: something i do not understand, on the demand side we are all worried about china. why isn't india stepping in to take some of this? india is growing at a very robust rate and importing a lot of oil and commodities. why aren't they taking up the slack?
jeffrey: theories about the ability to unleash the potential of the indian come -- economy and consumer. we have seen successive disappointments on that side. when we look at the gdp figures for india, we have some questions about how well that is being captured but you are not able to really generate the kinds of demand growth that is necessary to have india take the mantle from china when it comes to the demand-side. jim: to add to what jeff said on india, you do not see the construction and infrastructure boom that we have seen and china which has really sucked in the commodities. isn't one of the really interesting things about commodities is all the commodity lenders and the increasing defaults that we are already seeing in the high-yield market? the high-yield market has become two-tiered. 80% of the market is quite is companies0%
whose business model appears to be broken because there commodity extraction. jeffrey: that is exactly what i was referring to, that for the fixed income market are now about the sustainability of a lot of the business models, whether or not at these lower levels even if we bottom to the floor, we are not going back to $100 oil. you are having to deal with those issues and that is showing defaults, rising defaults expectations, and the bifurcation in the credit market. jim: we were talking earlier about the high-yield etf. i find the idea of a high-yield etf based on the index kind of a strange concept because it is such a bipolar market that you could have an index of the energy piece and the index of a non-energy piece, that might the coherent. isn't it a case that high-yield
is such an efficient and varied -- such an efficient and varied market that it really does not lend itself to index investing? jeffrey: i think we have to think about index investing and bifurcation issues as one issue, and address the other issue, the benefits you see in products like etf's that give you liquidity solutions. a lot of the earlier section we were talking about seeing changes in the user base for these vehicles because of what they can do for liquidity. instead of having to trade all those individual components and deal with that, you get to trade that gives vehicle you overall exposure to the market. jonathan: really great to have you guys around the table. thank you very much for joining us. really appreciate your time. megan: up next in his bloomberg markets with vonnie quinn and
mark barton. vonnie: we are going to be talking jobs. us.med el-erian will join reaching full employment and is that why we are seeing job creation flow? the fed pushes off that potential june rate hike that the markets were not seeing any way. we will also be talking credit markets with marquis so of timco. -- sango's managing up next ongan: bloomberg , highlights on this jobs friday. ♪
up. >> i think much depends on the stock market, the fed. the market is fixated on stock prices and equity prices and to the extent the stock market holds, i am not sure that june is out. tablee is already off the so bond markets where pricing zero probability of june. if you had a strong report you bring june back in and the problem is the market had such a low hurdle for any of that happening, that was the bigger skew and potential shift in the market. >> talks will look at the wage , andh number, labor force -- thet we are seeing doves will point to the top line number of 100 weeks the thousand. i am not sure -- 160,000.
jonathan: the reaction to the april payrolls report. if there is anyone left thinking they are going to hike in june, even goldman sachs has capitulated. david: we said there was no drama, but the markets have said it is not happening. megan: sudden breaking news, actually a horse. david: i want to thank megan murphy. it has been great having you. that does it for "bloomberg ." thank you for being with us. ♪
is on bloomberg television. vonnie: we are going to take you from new york to london to louisville in the next hour. jobs report showing u.s. payrolls climbing by the lowest amount in seven months, 160,000 positions. what does it mean for the economy and the fed rate decision? volatility spelling trouble for goldman sachs. extending job cuts in fixed income operations to 10%. vonnie: it has been called the most exciting two minutes in sports. we look at the kentucky derby and who the favorites are. desk head to the markets where julie hyman