tv Bloomberg Daybreak Americas Bloomberg February 2, 2018 7:00am-9:00am EST
u.s. yields reaching 3% with jobs day on deck. deutsche bank revenue falls to the lowest in seven years. amazon crushing it. jeff bezos delivering amazon's most profitable quarter ever, and he makes $6.5 billion. david: welcome to "bloomberg daybreak" on this jobs day. it is also groundhog day. equities saw their shadow. alix: now they want to go back to monday again. can we talk about the 6.5 billion dollars jeff bezos made overnight? i cannot even quantify that. amazon is no help for the equity market, down triple digits for the dow. this could be the biggest weekly drop in the dow and s&p in more than two years. if we get an upside surprise on wage inflation, look for the equity market to drift lower. the euro-dollar lower on the
day. yield unchanged. we are at 2.79%. are we hitting the moment we start to breach the pain into the equity market? crude down 1/10 of 1%. david: time for the morning brief. exxon releases its earnings report. at 8:30, the jobs report will be released. at 10:00, we will see u.s. durable goods numbers for january and that takes us to our first take. first, disappointing deutsche bank earnings. second, the tech earnings after the bell yesterday and amazon killing it. at 8:30, it is all about jobs and wages. alix: you are talking like me. let's kick it off with deutsche bank because at one point it was falling the most in germany in about six months. riccadonnais carl
and synovus trust company's dan morgan. if you look at trading revenue, down 27%, it is not a deutsche bank issue but it looks ugly. carl: we have seen that across the banking sector among the major trading floors. q4 was a quiet quarter for the markets, and now as we transition into the new year, we have yields on the move in the fixed income market, equity volatility is picking up as well. the trading environment, not specifically for deutsche, volatility is good. our revenue isd, down but a lot of people's revenue is down. what struck me is there are things they control, like cost. john cryan promised to control costs and they actually went up. that, i do not get. alix: expenses eight up about
93% of revenue last year. some of that will be investing in tech, but that is a really ugly number for a bank that has had time to get its book in order. david: john cryan has promised he is going to do this. i used to do this, it is not fun to cut costs, but it is your job. alix: well shareholders boot him? david: there were rumors of that. alix: here is a bonus. david: the patient's has to be running fin. -- thin. alix: talk about killing it, take a look at amazon. deutsche bank dragging down european equities and equities in the u.s., but nonetheless holding steady at 5.5%. dan morgan, you are a tech investor. is there anything negative in amazon? dan: as you guys are talking
about, all the matrix were positive. what was interesting is fulfillment costs year over year ,n the quarter was up about 55% and it did about 38% increase in revenue. that kind of made me scratch my head. where you continue to see fulfillment costs increasing at a faster pace than revenues, which leads you to believe that even with the increase they had recently for prime members that get free shipping, you are still seeing costs rise associated with that, faster than sales. in the past when amazon has missed the quarter, they talk about fulfillment and moderate -- marketing costs mean higher than anticipated, so that is the only negative thing. david: are we finally seeing the payoff of all of that investment mr. bezos has been making of where houses and infrastructure and everything else? dan: i think this quarter was a quarter that kind of brought
that strategy to light, that it is paying off. also have you -- as you have talked about, aws did a great job. $5.1 billion, that is another area they have invested in terms of technology and the cloud space. that was very encouraging. ,ws is 65% of operating profits so they put a lot of money into building that out, along with warehouses and fulfillment. it looks like it paid off this quarter. alix: look in general at the big tech we saw yesterday. it is a broader look of apple, amazon, and google year-over-year revenue growth, apple the laggard. amazon crushing it, 38%. apple, 15% tax rate. how is this not going to filter through to the economy in a meaningful way? carl: it will filter through in the way of special dividends and
buybacks. that is when -- what we saw when there was repatriation incentives in the george w. bush era. there is also incentive position of capital investment or business investment, but businesses do that when they need to, not. the as a response to a tax change. nonetheless, these are economic tax change for an economy that is picking up speed. changes will further their it -- thee it to accelerate, and markets are buying into that if you look at treasuries. david: it was not all rosy. if you look at all full -- alpha that and google, the costs. 24% of revenue going out the door? dan: google is an interesting story. one thing that was somewhat positive coming out of alphabet and google's other revenue, that ,as up considerably, up 38%
$4.6 billion on the quarter. the thing we have been waiting for google, we know amazon has aws. google has been trying to make a second big wheel. will it be dcp, their cloud platform, and will that gain momentum? that other revenue, where the cloud revenue comes from was actually pretty strong on this quarter, gives us something to hope for down the road that they can build a model aside from advertising. alix: apple did not have an iphone apocalypse. this is the iphone average sales $796. 760 -- $100 more per phone then before. they are selling less phones at a higher price. is that enough to want to buy apple? dan: what is interesting is the story is changing.
it used to be that they came out with a new fun -- phone, had all this excitement, and they ramped up. now it is a different story. it is kind of a flat iphone unit volume story, but average 14%ing prices, $796, a increase year over year from the same quarter a year ago. was $760. it has turned more into a story of we are going to grow revenues and iphones simply through raising prices and selling higher-priced phones. we do not need to care as much about the fact that unit volume could be flatter or slightly down. that may be the new story with apple, along with the repatriation of money coming from overseas. they have $250 billion. if they bring that down, it could be another $1.13 in earnings.
we are going to turn to our third story of the morning, nonfarm payrolls come out in just over an hour. the expectation is 180000 and you are north of there, but i am interested in the wave increase. carl: i think consensus was kind of shaped by the disappointing december outcome, but we cannot look at december in a vacuum because november was a blowout. things are kind of moving sideways for the trend. the wage trend is moving sideways and we are not seeing acceleration yet. with the unemployment rate as low as it is, and breaking into high 3% territory by year end the come at you are finally going to see more wage pressures. the phillips curve still works at some flatter level. i do not think we will see that in today's results.
if there is a surprise on the earning side, to see if it is concentrated in sectors that would be impacted by the minimum wage increases at the start of the year like retail, lodging. david: 2/10 of a percent increase in wages. it was .3, .4, how will people react? alix: depending on what investors you are. carl: the issue is that we get .3 here, the still keeps the year on year rate of change within the range that has been prevailing over the last two years, so it will not be a breakout. .4 would play into the narrative that inflation is coming back in a meaningful way, and the fed will have to respond differently than they have been signaling. alix: thank you very much. morgan,cadonna and dan great to see you guys. coming up, gary heminger,
marathon petroleum ceo and chairman will be joining us. what is happening in the market? dow jones futures down 221 points. you have the dax and deutsche bank. that is the print from yesterday's session in the u.s. deutsche bank is getting clobbered as much as 6% or 7% in germany. this is bloomberg. ♪
fourth-quarter sales that were better than expected. apple has eased investor concerns somewhat, posting results show zynga solid demand for the iphone x and they promise to put their cash fund to work. alphabet is being weighed down by rising costs. the company reported fourth-quarter estimates -- earnings that missed estimates. the cloud business appears ready to challenge amazon and microsoft, but the company is being hobbled by google's rising costs. bitcoin hit a low for the years since setting in overall high of more than $19,000. than half,en by more hurt by expectations of more government oversight, fears of price manipulation, and concern it is just another asset bubble. alix: what you do with $3.5 billion in cash? that is the dilemma facing gary
heminger, ceo of marathon petroleum. last quarter, it reported a $1.5 billion gain due to tax reform. cash flow is still set to pick up. great to have you here. gary: thank you for having me. alix: how do you prioritize what to do with $3.5 billion in cash? gary: as we closed these two transactions, we dropped $1 billion of cash flow into mpl s and exchanged our rights for shares of an mplx. we have been very clear with investors that we will continue to have a large capital return program. you probably recognize monday of this week, we announced we increased our dividend 15%. that was in celebration. we usually do our dividends in july. we will continue to look at
buying back shares, and also we have some very good investment opportunities that we see in refining in the midstream space and retail. alix: it is kind of the perfect storm because refineries have benefited from the strong demand, and you have seen a nice spread between wti and brent, nice exports here it will any of that go back to the workers? gary: we are in that conversation right now. we are not doing just a one-time payment to employees. we had a very strong year last year, and the employees will recognize that as we finish up our compensation for the year. alix: well unit labor costs start to rise materially? gary: we are seeing labor costs starting to rise. alix: you also -- as i mentioned before, you have refining, the retail business, and the state in an mplx. how do you unlock value? where are you going to do m&a?
gary: on the refining side, you have heard of imo. that will offer diesel across the chain. we have been investing and will continue to invest between now and 2020, to be ready for the new strong demand in diesel for all the shipping around the world. that is a big place. we believe the diesel demand will continue to grow. there was a surprise last year that gasoline demand was up about .5% when the expectation was it would be off about .5%. to bene demand continuing strong, and diesel demand up about 3.4%. alix: you are putting $35 million into speedway. if be targeting acquisitions? gary: we continue to look at everything available, and there could be opportunities. alix: is the value good? gary: it is very competitive in
the retail space. if you look across the number of transactions done over the past couple of years, it is a competitive space. we are increasing our capital in speedway this year. the hess acquisition we made about four years ago, we have pretty much rebuilt or remodeled most of those stores. we put some more capital in, but also building out in the midwest. alix: on the call yesterday, you said you see $70 oil and oil staying around $70. when do you see demand instruction? gary: at these rates, i think we will be in pretty good shape on the demand side. we are expecting demand this year to be flat to maybe up a couple tenths of a percent. 2017, weecognized in expect the economy will continue to grow this year. if you look at diesel sales,
they are a good predictor of where the economy is going. i stated, had a strong 2017 and we expect see a strong 2018 because that is getting goods to market, and you need diesel to manufacture and build. alix: you will have a unique insight into what the producers are doing, and that is the wildcard. what are you hearing and seeing? are they ramping up production? will we get more in the permian? gary: absolutely. we are strong in the permian and the marsalis utica. drillers havethe a big pickup in their work. also, the wells that had been drilled and not completed yet are now going back to being completed, bringing their production all strain. we had a 19% increase last year .n production in marsalis utica
we are expecting to see that type of an increase again this year. alix: if that happens, how do we hit $70 and stay there? in terms of permian, you are seeing more. gary: if you go back and look at the fundamentals of the inventory, we really have brought the crude oil inventory down in the u.s. inventory across the world has really dropped. a one expecting about point 5 million barrel a day global increase in demand this year. where thek globally inventory is going to go, as well as in the u.s., the incremental production, there is a must a million barrels a day being exported, of crude oil out of the u.s.. has closedxport because of the rallying wti, so don't we in theory need lower oil prices? gary: and depending on what happens with brent as well.
closed, -- while that has closed, we are still seeing production leave the u.s. yes, thepecting that $70 or so in crude oil prices where i would expect them to see close in 2018. i also look at the total inventory across the globe. it is really coming into a good balanced position. as well as gasoline and distal let's. our refined -- distillates. our event -- refined products is in better shape than years. wait forming up, as we the jobs report, washington waits for the release of the new nas memo. more on the contrary -- noon yet memo.o -- nunez this is bloomberg. ♪
david: president trump reportedly said it is ok for republicans on the house intelligence committee to release the memo they say shows fbi bias. it is the hottest political issue in washington, and the president tweeted it is all the fault of fbi leadership. "the top leadership have politicized this sacred investigative process in favor of democrats and against republicans, something which would have been unthinkable just a short time ago. rank-and-file are great people." kevin cirilli is in west virginia at the republican congressional retreat. give us a sense of how hot this issue is in washington. kevin: scathing. the bottom line is that yesterday, several republicans telling us at the retreat in west virginia that they are all
in, in terms of getting this memo released. today, president trump bolstering their claims and saying he supports the release of that. democrats are saying that the nunez memo is something that was edited. mark meadows said those were little more than grammatical edits, and paul ryan telling us yesterday they needed to be edited as a matter of national security. either way, the senate minority leader is calling on paul ryan to remove devin nunes from his chairmanship of the intelligence committee. that likely will not happen, but the memo could be released as early as today. comey has tweeted as well. "all should appreciate the fbi speaking up, but take heart. american history shows in the long run, weasels and liars
never hold the field as long as good people stand up. not a lot of schools or streets named for joe mccarthy." kevin: this is the first time of president trump going all in on urging the release of this memo. he is at odds with the acting fbi director, christopher wray, someone he himself nominated. david: thank you, kevin, from cold west virginia. alix: you are looking at triple digit loss on the dow. deutsche bank, spreading to the u.s.. oil holding up relatively well. this is bloomberg. ♪ we use our phones and computers the same way these days.
and now, get a $200 prepaid card when you buy an iphone. it's a new kind of network designed to save you money. call, visit, or go to xfnitymobile.com. ♪ this is bloomberg daybreak. we are looking at a potentially ugly open in the u.s. the dow jones are by about triple digits. s&p 500 off by about triple
digits, as well. you could be looking at the worst month, the worst weekly drop in the dow did more than two years. all of that has to do with the dax spreading over to europe and it leads to weakness in europe. the other corporate you could blame is what is happening in over 3% forarket, the 30 year yield, the first time in months that the dollar is broadly stronger, the yen getting hit a little bit, but nonetheless, a yield story. what happens when we wind up seeing a three handle on unemployment rates? david: that will not be pretty for the s&p market. people are getting nervous. alix: for sure. the other asset class is crude, on its longest winning streak since 2010. , lookinghis bloomberg five straight monthly gains, the
longest in years. goldman sachs upgrading their call, saying oil will surpass $80 in six months. joining us is ed morse, who has called for brent in the second quarter at $65. it to see you. do you think $80 is realistic in the short-term? ed: i think they have to make a big bet but there will be a lot of supply disruptions in the world. the balance down, and a lot has to do with your last guest because we think he is underestimated in response of the u.s. to higher prices. alix: when does that kick in? ed: it has already. you cannot see because of the winter demand, which is pretty high, given the weather in china and north america, but look at what iea did. they revised the november u.s. production by 400,000 barrels a day. it is just about the size of the smallest of the country. alix: i am pulling up a chart illustrate that. you can look at how huge that
increase has been. come inside the bloomberg and look at the yellow line is what you need to know, and that is shale oil production and that brought up total production to over 10 million barrels of oil a day. david: what shot it up now? a lot of people would not expect oil to be where it is now, what did that? ed: i wish you had the chart up of the amount of net in the oil market. alix: i got it for you, ed. ed: do not underestimate that. that is the other thing besides the high price. when high prices were going up, managing net length in crude oil surpassed last year's 930 million barrel number and now it is about one billion, 150 billion barrels worth. it is not going down again. that is the first sign to look at. the money that came in is going to go out. you were looking at the bond and equity markets but that is tiny compared to the bond and equity
markets. you get the rotation out of one of them into commodities for a while, and there are good reasons why money is going into commodities, including protective oil prices, they look type, including more importantly that we have inflation on the horizon and investors generally think oddities, oil the most liquid of them, is the world's was perfect hedge against inflation. i feel the opposite alix: reaction is to say -- alix: i fill the opposite reaction is to say as a percentage, it is low relative to historic norm. ed: undoubtedly, a portfolio manager wants to percent of portfolio and commodities and every thing else is not enough but commodities has to go up, as well. we are seeing a little bit of that. we don't think it is a big driver. if we see one monthly driver, we think it is the u.s. dollar. is ather factor really managed money going into commodities.
all durable money. it is not sustainable capital. it is fickle. we are looking to see what the trigger is per a underlying factor in my judgment is the supply on the oil side because people are really underestimating it. david: go back to the dollar, you said 20% is accounted to the dollar, what are you rejecting on the dollar -- what are you projecting on the dollar? ed i follow what my colleagues and specialists -- ed: i follow what my colleagues and specialists a. we have a lot more to go in terms of dollar depreciation, particularly in some emerging-market currencies. one of the major factors in the market today has been a remarkable pickup in debt issuance by a emerging-market countries, along with that, the move into equities -- em equities. them isl we hear from discipline. we are so locked in, the hedge
is at 50. if they cannot take it manage of this rally, how do you factor that? ed: i think some take advantage of the rally. i would not say it is 50, i say a bit higher than that but you are right, those who opted to look at the price may be disappointed. when we get the data for the fourth quarter, we will see that it was pretty strong and we will see first quarter hedging strong. we were projecting before this rally in prices, so the middle of the last quarter, we were projecting u.s. production of all liquids combined of about 1,000,600 barrels a day. we just had the marathon view on demand, and ours is the same. global demand going up about 1.5 million barrels a day. we think the u.s. will supply all of that demand. the stunning part of it is you get higher prices and we think u.s. production growth, crude oil, natural gas is, will hit 2
million barrels a day, and add another half a million barrels a day from canada and brazil combines, and opec is in a bind. how do they get the production to the markets? more stunning is that if we look at something else that your previous guest looked at, mainly u.s. exports, if you look at the october dates, the last time we have had final u.s. data, u.s. total exports of crude oil, petroleum products, natural gas liquids, was seven point 2 million barrels a day. the crude oil number was up 2.2 million barrels a day. opec has got to worry about that the u.s. is taking market share away from the traditional producers in the world. when we wind appearing things on conference calls for e&p's like dividends, response ability, listening to shareholders, discipline, all of that, hogwash? i would say some companies are advertising themselves as
being disappointed, but look carefully at what happened to forward guidance. much of it so far in this -- this has been corridor has been we think raising our cap spending by 10%, and that is above the incremental 10% companies have been talking about in the last quarter. i think we will see not only cap spending going up, but we will see a bigger surge in u.s. production growth then the consensus was for that. david: ed morse, thank you. fromg up, we will hear john cryan, and he has some explaining to do. [laughter] alix: a little bit i would think. also, we should point out that beatingad earnings a estimates, getting a nice pop in premarket. this is bloomberg. ♪
♪ francine: this is bloomberg daybreak. . am kailey leinz in the next hour, alan krueger, princeton university's economic professor. ♪ alix: happy friday. we will turn to wall street to morning. things this first, airbnb losing its cfo after he was overlooked for the coo job, and worries about the ipo coming out. at radele are looking leo, shorting italian equities. italian banks front and center for him and beverage building on wall street. cbs forming a special committee
to look at a potential combination with viacom. david: one of my favorites. we had joining us jason kelly, bloomberg's new york euro chief and executive for global television. let's start with airbnb. this is a well-known name. jason: one of the reasons i love the story is and is known around wall street and silicon valley, and it was one of these handful of big time wall street executives who made their way to silicon valley -- david: jobs try to get him to become cfo. jason: that is exactly right. this follows in the path of , and he went out to be the cfo of airbnb and it did not work out. based on what we are hearing, there were some tensions over the fact that he did not get the coo job. david: we do not want to bury melinda but the woman,
johnson, she got the big job. in some ways, that is the bigger story. alix: i want to know what laurence will do now. david: she will be one of the most influential women in silicon valley. jason: a question around airbnb is the timing of -- alix: the ipo. we are watching ray dallas, a triple -- great alley-oop, he triple -- ray dalia. jason: i love this because it is a driven bet. the italian elections are coming up. when you see hedge funds really sort of taking a big swing, you pay attention and ray dalio,euro -- ratay everyone listens to him. i grabbed this, way to the set because i know that the pe guys are going to talk about this and the bankers who love the pe guys
will talk about this, but in the wake of private equity deals, people are starting to get the sense that a lot more leverage is available for private equities. david: not so much because the rules have changed, but the banks are not breathing down their backs. alix: yeah, let's talk about $3 million. david: ok, so my story is cbs and viacom. jason: [indiscernible] david: you remember they were originally together in one company. and they were split up. on myput up this chart terminal. it shows the ratio of the price in the stock to the revenue that says they used to be close and now cbs has blown them out of the water. the revenue of the two companies is roughly the same but the market cap is like 40 percent to 60% higher. think,asically, i because you have retransmission
on one hand, which is lining and it iss fascinating that the two companies have gone different ways and the reverse of what everyone thought. it is funny. les said he did not want to be burdened by viacom, what is in it for him? the word now is that there is pressure on him and there is more speculation. did you know they appointed special management from both boards to take a look at it? alix: what i wall street bankers thinking about thisalix:? jason: it feels like this. this is one of those perennial things. you feel like it is on the whiteboard of every banker out there. if we can find a way to do this, and i have to think a lot of expense accounts have been affected by wining and dining people to get this done. david: angela cc bob iger buying a good chunk of it -- and if he sees at bob iger buying a good chunk of it, he will be like,
wait a minute alix:. how did you get that question mark -- how did you get that? david: thank you. deutsche bank disappointed pretty much across the board this morning. the stock is falling on the news still holdings out hope that he believes growth over turn 2018. earlier, matt miller talk to it the ceo in favorites for deutsche bank about the turnaround plan. >> i am more confident this year than last year. although, it is fair to say it any bank did not anticipate what happened in the trading markets last year. it turns out, we are disappointed with the year and quarter on quarter revenue shipped. we gained market share, which is perhaps reflective of the fact that we are on a recovery phase. right now, i think that there has probably not been as good a time to be in banking in the three main economic blocks. because the economic backdrop is
marvelous. levels client activity are picking up. much more on the corporate side than on the institutional side, but there are drivers on the institutional side, particularly, we are looking forward to euro rates going positive again, which i think will drive activity. matt: the main reason you will have to extend or push those out is you did not dispose of 900 million euros in assets on time. euros worth million of costs and a similar amount of revenues. these are businesses that do not make much of contribution and they are not a quarter to what deutsche bank is. matt: does the asset management ipo fall under that umbrella because in london in november, you said you hope to get that done by the first quarter, do you think you will stay on schedule with that? >> i'm not allowed to say because when you are in a security flaws world, you have
to be careful about what you say. we make great progress. we are not quite there yet. we had i's to dot and t's cross, and i think the market is in great shape and my view is we take the first available window. matt: one of your shareholders has said it once to it -- wants to expose $60 million abbasids in the first half, is that stake one of the things you think they settle? >> i honestly do not know. we never discussed with them. remember, it is a matter of public record. in has about three colors around it. settle? >> i honestly do not know. we never discussed with them. i do not know what their intentions are. our relationship with them is fine. they are the contracting part in the derivatives. i think the shareholders and ceos and advisers on our board have a great relationship. bonusesth regards to
and when i talked to bankers in london, in frankfurt, this is one of the things at the front of their minds, and there was talk in the press conference about how you may have lost talents because of your previous remuneration models. are payingl you competitively not to get the best and brightest on wall street? >> i think we have shown we can. a new head of global equities. you are rights. we took a risk last year. it was major. we do not award any of the traditional part of the bonuses to individual contribution. we are not being semantic for compensation. a lot of this is almost arithmetically driven. the compensation world has changed, but paying that plus as opposed to the minus is important for our people. i do think for our best people, we are paying markets.
we demonstrate that by hiring and retaining. we do the best we can. we have to balance the interest of all eibar stakeholders. -- of our stakeholders. the compensation for 2017 was always going to be greater than 2016 because of 2016, we do not award individual bonus type awards. matt: will 2018 the better than 2017? >> i do not know. i hope to date to say that if the bank performs well, it can be, but it has to be performance-related. in 2016, it was not because a lot of people did not get paid and had stellar years. in 2017, i think we have been veering slightly on the generous side, if i made suggests. not for everyone, but we had outstanding performances. our credit dismisses have had as great years as they have ever had. on some other businesses, we are
investing. we talk about investment for the future. i think we have tried to strike the balance right. alix: that was john cryan, deutsche bank ceo, speaking to matt miller. he joins us from frankfurt. did you get a sense you are talking to a ceo who expects to be in that job in six months? matt: i did. i asked him that question, how much pressure he was feeling?he mentioned during the press conference that he had talked to all their major shareholders and said he did not feel pressure from them at all. he is more concerned about technology. i know you guys talk about syntax a lot on the program. it seems that is a bigger threat, not been prepared in time, then worried about his job personally as ceo. that is one of the reasons they are spending more money, investing more money in 2018 than they previously would have expected and costs are not coming down as quickly as they would have liked. david: we see this in business after business, not just
thinking, you have a core business you have to maintain and manage well as you go into a new one. it is a tough transition, but talk about the core business. as he talks about sales, his cost cuts were selling assets, not getting rid of people but operations. he says, the revenue is the same as the cost, we are going to sell it. who is going to buy that business? matt: well, the core business is they had this tough. not just for deutsche bank. as far as trading revenues, they it gained market share, but has been tougher everybody across banking. the question of who is going to buy the assets that they want to why -- maybe the answer is it has taken them so long to sell the assets? maybe they just are not buying the buyers out there and they have to look at a different price level. we will see if they get them sold off in 2018. the cfo says he is confident they're going to. david: forgive me, this may
sound harsh, this sounds like a dog ate my homework. john cryan says it will cut the cost cuts, but they are not going down. why isn't he actually cutting the cost of deutsche bank? i do not understand. matt: it is a fair point, david. now, beentil successful in keeping costs under control, the one thing he has been lauded for by shareholders at deutsche bank until this quarter, so that is the problem. revenue continues to fall. last year at the same press conference, they said, we have done the turnarounds we once, we have it lined up the way we need dates, and we will see revenue recover this year. it was a deja vu moment this year at the press conference, but the real problem for investors, and the reason you see a 6% decline in shares in frankfurt, is the costs all of a sudden have gotten a little out of control. david: thank you. alix: you are fired up, david. david: i had to cut costs.
♪ i am: here's what watching. super bowl, but i will not talk about the patriots are eagles but ticket prices. traditionally, we look at the chart, as you get closer to the super bowl, the price goes down. but since 2015, when there was a fiasco, involving the shorting gone up.les, it has this is because the nfl has gotten their arms around how they can control this so the scalpers to not make all the money. they basically have given over control of pricing of tickets to the scalpers, so now they have
their own operation to sell their own tickets through their own operations. alix: if i want to go, i am paying over $1000? david: precisely. what does it have to do with taylor swift? she has a new to work and doing the same. her friends were getting really distorted from the scalpers, and as a result, she is taking a hit because she does not want the scalpers to hurt her fans. alix: i wonder if that changes. coming up, we are a half-hour away from the all-important jobs report. we will speak with alan krueger about his take on productivity as the dow looks to be ugly in the open, down triple digits in the futures market. this is bloomberg. ♪ we use our phones and computers the same way these days.
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europe 30 year reaching 3%. job data on deck. deutsche's disaster, revenue falling to the lowest in seven years. and amazon continues to crush it. isir most profitable quarter delivered ever, and made $6.5 billion. david: jobs day. i am david westin alongside alix steel. every time you say $6.5 billion made overnight -- alix: he is cashing out. incredible. david: incremental. alix: we do have earnings coming out. i want to update you with exxon. $1.97 a coming in at share. for exxon, this is the key, ed billions telling me, $9 or the fourth quarter, $2 billion more than some estimated. so the conversation starting to spend more, will we see that in production? when producers not have the
discipline that we are expected to see to be very material when it comes to the oil market? is up .3, but the real headliner is the dow and s&p. the dow was down by triple digits and s&p off by 16 points. it looks like an ugly open. jobs are front and center. the dollar is broadly stronger. 10 year yield, 2.79%. 3% for the 30 year. you have that, deutsche bank, both causing turmoil in the equity market. david: timeout for the morning brief. at 8:30e job support today. we will cover it live. at 10:00, the u.s. durable good numbers for january. at 1:00, dallas fed robert kaplan president will speak in austin, texas. europehe headline in comes from deutsche bank, shares down significantly, the worst -- 22017 -- the
worst since 2017. it has been the worst performer in the european thanking index. joining us is stephen, you heard from john cryan, he thinks he is being generous with paper 2017 -- would pay for 2017. he needs to invest in one second best in tech, how long does he have? >> it is a difficult situation for him. the bank, as you saw, recorded the worst fourth quarter last year in seven years. it has to do with the trading units, of course. it is important to award money to these people, but he cannot afford to lose anymore ahead of the investment bank conference. people have abandoned ship last year because of a strong bonus cuts, so not to pay them would not be a good decision, but he does not have the money to do it. kailey: whether fairly --
david: whether fairly or unfairly they ask, how long will john cryan be the ceo, is that an artificial deadline coming up? it is in may, right after basically the first quarter results. if the first quarter is as bad as the fourth quarter, people will be extremely disappointed. they are disappointed now. deutsche bank gave its profit warning at the beginning of the month. and now, they come up with results that are even worse than think, and she has to again, if they disappoint again there willt quarter, be a lot of shareholders asking important questions and john cryan knows he is under that pressure and it will increase. david: we know not all shareholders are created equal. who are the big institutional players who might say, we have
questions here? n: ironically enough, the big ones are the ones who hna, the chinese conglomerates, members of the family, and they are facing very very strong questions about liquidity. they had announced they will be selling assets over the first questionsis year, so are about that shareholder and the other shareholder in the family have the same questions, as well. the shareholders asking questions a john cryan is another problem for him. david: that is a story in and of itself. sthank you very much. we get the first jobs reading in about 22 minutes or so. the first one of 2018. to help us set the stage, one of
the nation's foremost labor economist, alan krueger, a professor of economics at princeton. we would not want to do a job stay without you. the americanat economic association last time, so slightly busy. david: an excuse. set the stage. is there a particular importance to these job numbers given where we are with the bond market and 10 year pushing towards 2.8, with the equity markets we see today? is it possible these job numbers will have particular significance for the markets? think they will. i think markets tend to over respond for the job support, but today might be different because it is important. david: in what part will it be most important, the wage number as opposed to the number of jobs? alan: both are important. last month, job number was week. -- job number was weak.
on the other hand, we got kind of a normal consensus type estimates, and then the focus will turn to the wage growth and labor force participation. alix: what happens if you get higher wages and a lower unemployment rate today? alan: i think you will see a bonds selloff. alix: what kind of labor market do you think investors are continuing to price in versus what the reality may wind up being? not necessarily in 30 minutes, but soon? alan: i think the bond market is pricing in an economy close to full employment. we are not seeing run away inflation, but we expect pressures on both sides. david: i would like to go below the surface numbers and i will put up a chart about diffusion, labor diffusion. i got it from carl riccadonna. it's a diffusion is increasing
in the marketplace, which is an indication of where we are in the cycle. explain that. alan: diffusion's across industries and job growth? david: yes, we don't have the chart that it shows diffusion -- as i understand it, the job growth is more diffuse rather than concentrated in a few sectors. alan: that has been the positive aspects, job growth has been pretty broad. one reason i think it is it will be more resilience because it is not relying on one sector. it is not just health care. the growth has been brought. some sectors have been stronger, like business services, but as you compare this, and i you have the chart, you can see the growth has been widespread. alix: when to be gets a three handle for an employment rate? alan: [laughter] that is the question. your guess is as good as mine. it is not out of the question it could be today. you only have to drop another point to a percentage point. i thought you would ask a three handle low wage growth in which
one comes first? alix: i like that question, so it's on his first? -- so which one is first? ala i think then: three handle headline -- alan: i think the three handle headline comes first. i have been expecting to see wage growth up to 3% over the last 1.5 year or so, so i am behind. there have been some shifts in the labor market, but we do not hear anything about wage growth. alix: alan greenspan talked about in terms of the phillips curve three tiers what he had to say. tom: does alan greenspan still believe in the phillips curve? alan: i never did. fixedsupposes a certain rates in productivity growth, and that is not going well with words. david: what do you believe or not in the phillips curve? do you believe in inflation, is a coming?we have not seen it
yet. part of a the problem is apparently the phillips curve. : it is interesting when he said. i do not agree with that, but i think you would agree that as the market gets tighter, you and see wages get bid up that process has been slower in this recovery than the previous one, and the previous one was slower than the one for that, so there are shifts taking place. i think the economy still works in that way over a long enough time. alix: alan krueger, you will be sticking with us. coming up, tom gimbel, ceo of the sound network, will give us an inside look at the inside job market and what ceos say is their biggest problem. i was to point out to exxon premarket, getting slams, down by 3%. here is the why, a big miss on earnings. once you back out some tax reform issues, they only made 88 cents in the quarter and
kailey: this is bloomberg daybreak. america is forecasting sales for 2% above average estimates. the drugmaker reported first-quarter sales better than expected. they plan to use benefits from the tax cut to boost growth. apple has eased investor concern somewhat. they posted results showing solid demands for its lightship iphone x . plus, they promised to put their buybacks,rk in
dividends and acquisition. the richest person in the world got richer. fortune rose $6.5 billion after strong holiday sales. today, hisk holds up fortune will hit a record 120 $3 billion. that is your bloomberg business flash. david: thank you. we are 16 minutes, 18 minutes away now from the monthly jobs report. bring inside look at hiring, we welcome tom gimbel. of princetonger university is still with us. you are on the ground, as it were, placing people, differently temporary people in the professional area. what has been your experience over the last three months to nine months in terms of demand for workers? tom: it is an interesting crossroads we are at compared to 2000 one coming
out of 2009 because we have this low unemployment rate, which you think would turn to be the employees market that they could dictate but it tends to be an employer's market, and we are not seeing a lot of wage growth areas the biggest is the wage gap. there is not enough of the right candidate base for the position as the economies change. david: explain that. we are putting up a chart in a moment, but what is the biggest concern of employers, and that skills gap, the need to find skilled workers was number one. if that is true, doesn't that give people pricing power? tom: it does, but it is a small, select part of the work force. we have a big break and take marketing, for example, it has gone from what used to be advertising and public relations to be more analytics focused. we have a whole swath of employees or potential employees that grew up in an economy that
was not data analytics focused and now the jobs people want or give ouroyers want to data analytic focus. we had this in between days where experienced people do not have the education and the knowledge, and the people that have that do not have the experience. give our data analytic focus. we had this in between days it is an interesting intersection now. alix: to further elaborate, if you look at the bloomberg and the get a small business survey, they are looking at the equality of labor as one of their biggest issues. say qualityndents is 19. you pointed out identifying candidates who put the culture was a big issue. i do not know what that means. tom: one of the big challenges that happened, we had the go-go era of 2002 to 2007ish is that companies are hiring anybody and everyone and e-commerce was still new. companies hired and hired to get seats filled and as much output as possible. postis happening now is
great recession is that people realize companies with a stronger culture, people who are happy, they're more efficient and outperformed the s&p. companies do not want to risk their culture and go on a strong tangents, hockey stick, lower left upper right on your graph, to giving in and having a bad culture, where you higher the wrong personality and it upsets the applecart. they are saying, you have a skill set, but i would have four people to really good work of five people than rather have five that upset everything. companies are realizing culture is going to help efficiency. let's ask about the skills gap, where experienced people do not have the skills and trades people do not have the experience. did you see that? is that new or has that been around a while, and what is the way out? al we havea had a skills much matchn: for a long time -- alan: we have had a skills mismatch for a while. i think our education system has
not kept up with the change in scope amends. on top of that, we had the worst recession since the great depression. i think employers got spoiled in the beginning of the recovery, or they had their choice in terms of who to hire, and they could pay them low wages. i think the environment has changed, but back in 2010 and 2011, they could find someone who fits with that training and they could pay them a low-wage. i think the longer this goes on, the more that mindset to vote go down. alix: it was interesting you said and employee would rather have four people doing that -- have four people doing the work of five because they don't find the right people, but productivity was down last quarter. what areas do we see productivity pickup and what areas are still far behind? tom: what we are seeing is what you are talking about, and that is there is this skills gap. you also have this intersection
where the a.b. boomers are retiring and we are replacing them with people out of college. had salaries that will not increase and you have more expensive people exit the labor expensive people entering. it will take time to catch up, so we need to look at that. we are seeing more and more demand by fortune 500 companies, as well as startups and every thing in between are salespeople. we see a lot of ceos and cfos saying it looks like the economy will stay strong, meaning 24 months to 36 months, and we will boost our sales force and take as much advantage as we can, and the turning doubt for that is not as long as it might be on the delivery side of things. david: how many of those jobs are permanent as opposed to freelancers? jobs are alles permanent. i think the gig economy is something being blown up a lot out of proportion. when it comes to more of the hospitality and service drops,
bartenders, cleaning folks, things like that, that becomes more gig economy and people are doing it on the site to make money. in the white-collar professionals, these are 40 plus hours a week jobs, over time in some cases, or commission of bonus driven jobs and others. we are still seeing that is a primary driver of this economy. david: alan, is that what you see? is there a stratification of these issues, where there is higher pay, more professional and permanent positions with benefits, as opposed to lower pay, more the gig economy, in and out jobs? alan: the economy is getting more polarized, but we are also seeing tremendous growth and independent contractors, freelancers. workers innot be gig the sense they find work on the internet, but even their 14% of the self-employed find work over the internet. that is accounting for a lot of the growth. in placing people through
temporary help firms, supply firms, that has accounted for a lot of growth in the last decade. alix: tom, we are a few away from retail jobs, they are down 20,000 in december. what is your take on that sector now? is strong.k retail i think we are focusing too much on we want to hear either really greater bad news. i do not think that either one is what reality is. i think you have months it is better and months that a worse. we are in a situation that retail is in the state of flux, meaning how much is e-commerce?what is the creativity ? when amazon's opening for stores, it shows there covering all bases, and where we will be 12 months from now might be different they were anybody thinks we are now. alix: we are overflowing things? no. we don't do that. tom gimbel, thank you. alan krueger of princeton university will stick with us. coming up, we are keeping our eye on the dollar and treasury market. the dollar is up modestly
♪ alix: welcome back to bloomberg markets -- excuse me, bloomberg day breaks. i switched shows. in the equity market, off by 232 points for dow, s&p 500 off by it isrt of it because spreading to the u.s. if you look at other asset passes, it is about the treasury market. 830 year yield, how it prints the first time in eight months we have been over the 3% level, moving up by one basis points. the 10 year strong levels we have seen also. in the jobs number, a stronger dollar. the dollar-yen is a different
story, the boj buying bonds in the market at a specified level for the first time since last july, getting a little support to the dollar number. what happens if we get strong numbers? joining us for more business news outside the business world, kailey leinz with first word news. president trump says the fbi and justice department have politicized what he calls this a good investigative process. the president's tweets today comes hours before the white house is expected to ok the release of a controversial memo, arguing the fbi has abused its powers in the russia investigation. the white house reportedly wants more options for an attack on north korea, according to "the new york times," white house officials are frustrated by what they see as the pentagon's reluctance to offer more plans on the strike. the pentagon says it is concerned giving president trump were options increases the chance you will act.
in london, a far right supporter, who drove a van into a crowd of worshipers outside a mosque, has been sentenced to 43 years in prison. the attack last june killed one person and injured 12. local injured 12. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am kailey leinz. this is bloomberg. david: thanks. we are a few minutes away from the january jobs report. injured 12. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. brad bechtel joins us now from new york and i were jersey joins jersey joins as an alan krueger is also with this, right here, not at princeton. brad, tell us about the fx markets and what they are looking for and how they might be affected or how they might not be. the: we will be look at average hourly earnings, looking for inflation, signs of wage growth. we have been missing wage growth, that is the missing piece and global economies these days. we are running around 2.5%,
which is not too bad. the fed will he on that and inflation markets, which means fx need to pay attention, as well. the dollar has been weaker throughout most of the of, and a lot of that story is related the growth -- to the growth dynamics around the world and inflation is a key component, to the extent to get the big jump in inflation, that can be important for how global assets are priced, especially in emerging markets and equities. alix: ira, what is going to happen with yields if we see a three handle or wages pick up? on: if we saw three handle jobs, i think you would wind up seeing a pretty substantial selloff, who early in the tenure sector, which has been doing worse than the rest of the yields across the curve. i think initially, you get out of the most liquid part of the bond yields curve, which is the seven-year and 10 year sector. eventually, you wind up getting more flattening because if you get a three handle and good wage numbers, he have to start
pricing for moore said in 2019 and that will flatten the curve. david: you pointed out some inc., there is a connection between but not necessarily a one-to-one connection of wages and unemployment. as a practical matter, which is more sensitive? which has gotten more elasticity to? the weights number or unemployment? ira: i think it winds up being the wage number for the market. a lot of the headlines in the popular press windup being on the unemployment number and that matters because you want to see people employed and the more people employed, the higher wages should be. as you mentioned in the last segment. i think it is that wage number that will get people excited about whether or not the fed is going to speed up its pace of hikes in 2019. alan: i think he is right about that and the top payroll number will matter more than the unemployment rate to
historically, markets are responded more to the bigger establishment survey, used to calculate the payroll job growth and actually the which growth, and the smaller household survey for unemployment rate. not that they are irrelevant, but crashing through will be an important achievement, but historically, there is more reaction to the employment number. alix: brad, does any number help the dollar? brad: the dollar will remain under pressure i think read it is a buy everything else kind of program going on -- i think it is a buy everything else program, where they are buying global equity markets around the world, including dax in germany, so it is a buy everything else in the dollar suffering on the back of that. i think dollar-yen will be interesting to watch. we have seen a site reversion of the correlation they had in interest rates to the extent to get the good number, you will see dollar-yen react to that and the rates market. david: has the market, the fx market discounted the tax cuts? brad: i believe so.
the tax cut is somewhat deflationary if you think about it because it gives the corporations the ability to steal market share in price, which could be a deflationary weight, but it spurs growth. it is a double-edged sword a little bit. i do think that the fed is still a little bit underpriced, and the tax cuts will probably impact that at some point. that will be a dollar positive in polls. right now, we are not seeing that show up. alix: are you short for the next 45 seconds? brad: i am long dollar-yen, that is about it. sure dollar everywhere else. great to see you. thank you. here is with the markets stock up, 30 seconds away from the jobs report. teachers under pressure, though off the lows of the session. in the fx market, and also in the treasury market, 303 is how
we print on the 30 year yield, up by one basis point. that will be a key level to watch as we get into the jobs number. in just a few minutes time. now we now, we have dollar-yen higher and stronger. mike mckee is in d.c. ine: 200,000 jobs created january, 190 6000 by private companies. unemployment at 4.1%. rate, including discouraged workers, takes up to 8.2%. earnings up .3 for the month of january. 2.9%,ushes the year up to which may be because hours worked dropped significantly, down by 0.2, the lowest since september, the last time we saw a year increase in earnings that high. notes on trump's stats.
there were 100 additional coal miners in january, and the african-american unemployment january, upduring to 7.7% from 6.8%. it is also the month of the annual benchmark revisions. we find out there were a total in2,000,173,000 jobs created 2017. 118,000 more than we thought. bring -- david: let's bring back in alan krueger. you study these numbers carefully. alan: i just went to the webpage to look at labor force participation, which stayed constant. it does not look like workers are coming back to the labor force, in spite of the tight job market. that might contribute to slightly stronger wage growth, up 0.3%. president trump just lost a talking point on the african-american and implement rate, with that jumping up. a perfectly solid report, and i think it suggests
the job market is continuing to heal. i would be surprised if the bond market did not take this into account. alix: it absolutely is. we are seeing a selloff pretty much across the bond market. you now have 30 year yields jumping higher than 3%. you had the 10 year yield over 2.8%. equities getting hit as well. dow jones futures off by 240 points. s&p futures off by 21. the dollar having a move as well. the dollar index jumping higher, up by zero point 4%. that is it. stronger dollar, weaker equities, stronger yields. is that what this is as we transition to a new normal? is this going to be our reality? economy continues like this, i think this is what we will see. it is perfectly rational. it is kind of what brad described to expect given the report. alix: unbelievable move. we look at what we are seeing here. member, the change in nonfarm payrolls at 200,000.
an employment 4.1%, earning 2.9%. alan: that is the number that grabs me. alix: we want to head over to ferro,tom keene and jon interviewing bill gross on the better than estimated jobs numbers. tom: we welcome all of you worldwide, coast-to-coast, across all of america. and on bloomberg television. william gross of janet sanderson joins us now. bill, we finally see good wage growth. article he, we see a revision -- critically, we see a revision upward as well. will that be the break at condition that gets us to the 3% yield you have talked about as a critical point for the 10 year? bill: i think it is, tom. toyou factor in 2.9% year-over-year wage growth, and , which isin a 1% in probably normal to expect, going
forward, you have 2% year-end labor costs and hopefully 2% inflation does not even factor into that area weak dollar over the past 12 months -- so yes, i think it basically means we are approaching that magical two at which the fed will continue -- let's put it this way -- will continue to raise rates. tom: well said. we know and you know we were to accommodative with vice chairman fisher. we have moved up, but we cannot get an inflation target, inflation-reduced fed fund targets right to get to zero. our real rates too low, and is the fed behind? it depends on which real rate you are talking about. the 10 year real rate is about 50 plus basis points. what has it been normally? well, before the crisis, it was close to 2%. therein lies the rub. the question i suppose for chairman powell -- what is the new real interest rate, not only ?or 10 year, but for fed funds
i think they're targeting of 0% , whichte for fed funds might mean if we had 2% inflation, a 2% fed funds rate. that is six months away, with two hikes, at 2%. nonetheless, if it goes along with what the market was expecting, now, perhaps, with these wage gains, a little bit more. jon: i want to talk to you about some of the price action in the treasury market off these numbers. 2018, consensus positioning around a flatter yield curve. i have seen a steeper curve on the session so far. how do you think about that at the moment? is that a consensus unwind of a crowded trade for a flatter curve, or a fundamental rethink about the shape of this curve through 2019? bill: i have never been an advocate of a flatter curve from this point forward. admittedly, the curve has flattened substantially over the past few years.
when many are expecting the 10 year and 30 year to flatten, and maybe for the 10 year to go higher. i do not think in this particular case, as we see inflation moving higher, which is what the fed wants -- the longer the treasuries are inflation-sensitive, compared to short-term rates -- i think we go through this cycle, this bear cycle i talked about several months ago -- i think we go through this cycle in a relatively mild fashion, notwithstanding today. not steep, but stays positive. that would be, for me, a two-ten spread of 45 to 50 basis points. jon: we talked about what higher rates could mean for credit and you express or you are positioned around high-yield. you expressed a short position. i wonder what your thoughts are at the moment. we have had repricing and treasuries and bunds, that have
not seen credit stress in high-yield and investment grade. i still see spreads really tight. are you surprised at how resilient trip -- credit has been despite the pickup in treasury yields? tight,hey are really jonathan, but they have widened, to be fair. cdx, they have spread out by about 10, 15 basis points. the logic there is that high-yield companies will have to pay more for the money. they have a substantial amount of bonds to rollover, to replace, when others mature. high-yield companies issue at the five-year area. 2020, they19, and will be faced with narrowing spreads in terms of margins and higher yields. that is why it affects high-yield bonds. i think they are going to continue to widen. tom: notice on bloomberg radio and bloomberg television that jon ferro was asking a sophisticated question, for his
wonderful show, the real yield. jon: shameless plug. [laughter] tom: sorry, bill gross. that was way to bond-like. -- too bond-like. tory month, we are going have bond prices go down. at what point does the retail investor or the smaller institutional account amec? they don't listen to you. they don't listen to your good competitors. bondare going to say, price down. i am getting out. how close are we to that? bill: i think we are getting there, on a month-to-month basis. they are losing money and probably have for the last two or three months. investors don't like to lose money. they prefer cash, or even cash in a mattress, i suppose. but it is a short period of time. i would say that bond investors should expect to earn nothing in 2018. and maybe with a minus sign in front of it. typically, that does not happen.
with higher yields in the past, it has been the yields that have compensated for the price declines. but now, in terms of going up by 20 or 30 basis points in the last month for the 10 year, that basically applies a 2% price decline. that requires an annual income in order toping compensate. i think retail is going to be sensitive from this point forward -- certainly after this report. tom: that is a really important statement. would you suggest that janice -- at janus that dividend growth is an alternative to clipping for bond investors? bill: unconstrained, and certainly janus unconstrained. we have been, because i have been forecasting higher interest rates and lower bond prices -- we have been short duration. typically, total term funds are forced to monitor what is called
the aggregate index, which has a duration of five cora -- five, or average maturity of about seven years. unconstrained can go the other way. we have been a minus two years duration for the last month or two, and i think you can see that in our performance. when you have a bear market, you want to go unconstrained, because it gives you the flexibility to go minus as opposed to plus. alix: that was bill gross of janus henderson, speaking with bill gross and jon ferro. you can hear more on bloomberg radio. bloomberg surveillance can be heard in new york, boston, washington, and across the u.s. on sirius xm. the change in nonfarm payrolls up 200,000. and implement rate steady, 4.1%. the news -- average hourly earnings of 0.3%. year on year, even though average weekly hours fell. he will break that down in a moment. the reaction is around the lows
of the session for the dow jones futures and s&p futures, but the bond market is where the action is. take a look at the 10 year. four basis points. are we looking at a potential three handle soon or in today's session? the 30 year shooting above that, up i four basis points. -- up by four basis points. the curve is not flatter. miracle can we see. we have seen a move intraday on steeping into-ten this higher inflation picture. we break down the details next. ♪
jon: -- kailey: this is "bloomberg daylight -- daybreak." coming up, gary cohn, national economic council director. ♪ and now to your bloomberg business flash. exxon mobil came up short in the fourth quarter. the company's net income and production missed estimates. exxon's ceo has tried to solve a problem of long-term spending -- acquisitions. bitcoin has hit a low for the year since setting on all-time high of $19,000 in december. the currency has fallen by as much as 60%. the going has been hurt by expectations of more government
oversight, fears of price manipulation, and lingering concern that it is just another asset bubble. seneca,neca -- astra the british drugmaker, will release new products for cancer, asthma, and other diseases. come in agreement with e-commerce giant alibaba. that is your bloomberg business flash. david: u.s. employers added 200,000 jobs in january. an increasing of 2.9 percent rate, even as the unemployment rate remained at 4.1 percent. u.s.lcome berkeley's chief economist, from his office in new york. thel with us is mike mckee, bloomberg policy editor. michael, give us your reaction. the treasury markets are reacting to this news. michael: treasury markets likely responding to the wage data.
got upward revisions to the december data, as well as an upward surprise to the january data, living wages up 2.9, year on year. most people were thinking around 2.6. there is a bit of a discrepancy there, because it is mainly coming from the supervisory worker component. you can split out and go for the production of nonsupervisory's. it is about 80% of the pool with the hourly worker. that is only up 0.1. a bit of a mixed signal. my view is markets are probably responding to that portion of the report. have seen thing i suggested already is maybe some money is coming through from one-off of bonuses because of the tax cuts. you suggest that is probably not what we are seeing. michael: i am suggesting the view is not uniform through both sides, for the supervisory, nonsupervisory components. this is what economists would
say we need another month of data to see what is happening. due to some of the one-off bonuses may be coming through, what if you are raising your hourly earnings, your hourly wage, and that has not gone through yet, we might see that pick up later in the production and nonsupervisory data. that i do think markets are responding to the upward surprise in wages. the main surprise was the good sector was just a bit stronger than we thought. really solid hiring and construction and manufacturing. alix: mike mckee, who is hiring? mike: the interesting thing i noted out of the report was, there is a lot of talk of retailers losing jobs, going into the holiday season, and in december, retailers lost 26,000 jobs, but hired about half back in january. transportation and warehousing, where you find amazon workers, up by 11,000. the career and message -- the categorynd messenger
also higher. we are seeing people move into the internet kind of jobs. the next thing for this administration is infrastructure. took a look at construction hiring. the construction unemployment rate is 7.3%. there are still some people to hire, but it has been coming down rapidly. if you are going to do a big construction/infrastructure project, you have to have workers. it would be interesting to see where they can find it. alix: what about benchmark revisions? what is the trend we need to be looking at? departmente labor estimates certain things like, the people are in the population and how many jobs. they go back when they get accurate data and benchmark for the year. this year, they were very, very accurate. the number of jobs created in 2017 was only 118,000 jobs, out of 1.4 million jobs. about 0.1% higher.
not a big change at all. it does show there are more people working than we thought, but not a lot. david: michael, talk about the average weekly hours. they ticked down. that is a number we often overlook, but it can drive a lot of labor. michael: in terms of the income data, that is important. in an aggregate sense, the economy can earn more income if we employ more people, work them longer hours, or pay them more. report cut both ways, in that earnings went up but ours went down. not exactly clear what was driving that. perhaps it could have been due to weather as an issue. we had bad storms up and down the east coast. it could also be autos. auto production and sales surged following the hurricane. that is likely to come back. perhaps we had a little less
production and working out of the auto sector. i need to dig into that more. it could be autos. alix: joining us now is been ofna rela -- is vince trader.g news, a former the conversation is going to be picking up steam. what do you do? vince: we are going to see a classic short squeeze. the market sold off heavily the last few weeks. this number. positive on the average hourly earnings front. traders are not want -- not going to want to take a big position going into the weekend. the painful squeeze, the short squeeze, we should see continue through the rest of the day. call you have a three hike for the fed. how strongly didn't open the door? michael: actually, we are at four, but we just moved to that in early january. i think the bulk of the data is very consistent.
the on implement rate did not move lower, -- the unemployment rate did not move lower. reports is persistent that wages are gradually moving higher, the fed is going to be biased to action at every meeting. above trend growth, some firming of wages, that is a recipe for fed action. house what is the white going to say? the president has been president for over a year. does he get some credit? mike: presidents are in charge when the economy does what it does, so he will be able to take credit, and when things go bad, he will have to take the blame as well. will00 jobs is what they focus on, along with the rise in earnings. with the earnings, we had a rise in september, initially supported as 2.9 percent, and then it dropped off significantly, down to 2.4. will need a couple of months to
make sure that number holds in there. if so, that is something the administration can probe. one thing they loses the african-american unemployment rate, touted at the state of the union. it fell out of bed, rising almost a full percentage point. david: does this make -- alix: is the dollar rally more than a short squeeze? when will we know that? >> i think it will be short term. we need to get to a point in yields where real yields become supports the that dollar. is it 3% of the 10 year? it may be. we have had yields so low, so long, they you get to a level that is attractive for investors. that will support the dollar. until we get there, it is not going to happen. much fornk you very joining us. coming up, we are looking at a market. the equities under pressure. you have yields moving higher,
alix: i am ripping up the script and watching markets. look at the reaction we are seeing from the jobs data. it is all about the move in treasuries, but that is turning into the equity market. we are around the lows of the session. looking for an ugly open. a 10 year yield of three basis points. 2.8%. now, the 3% conversation is going to be even more front and center and more realistic than it was a month ago. david: you can see it with any of these charts. in fairness, equities were headed south before the jobs report. have the inflationary wage data, higher yields in the u.s., and a bonds selloff in
europe because of deutsche bank. deutsche bank getting hit, bleeding into the equity market. that is bleeding into our equity markets. you have a two-pronged attack on u.s. equities. david: a rough weekend. traders deciding what to do. alix: you do not want to take on big positions into the weekend if you don't know how it is going to shake out. coming up is gary cohn, national economic council director. lots of good details to talk to him about. david: a great day to have gary. like to know what he thinks about rates that are important to the president. they are not moving. alix: the bloomberg market open is up next with jon ferro. ♪
jon: coming up, it is payrolls friday. treasuries declined. the dollar jumped. at the fastest pace since the end of the recession. bond weakness returns for u.s. stocks. and groundhog day for deutsche bank. revenue falls to a seven-year low. pressure building again on ceo john prime. -- john cryan. into negative territory, down 17 on the s&p 500. the fx market in the g10 space, a strong dollar story against everything. 1.2440.lar back to in the treasury market, yields climbing higher. some of it from the payrolls affect in the last 30 minutes or so. with a big