WEBVTT - Bofa's Harris Says Bond Market Has Been Too Optimistic (Audio)

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<v Speaker 1>Broadcasting live to New York Bloomberg eleventh, Rio to Washington,

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<v Speaker 1>d C. Bloomberg to Boston, Bloomberg twelve hundred to San Francisco,

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<v Speaker 1>Bloomberg nine to the countries es Exdam General one nine

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<v Speaker 1>and around the globe the Bloomberg Radio Plus happened. Bloomberg

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<v Speaker 1>got gone. This is taking Stock. I'm Kathleen Hayes along

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<v Speaker 1>with pim Fox. The payroll pop, that's what they're calling

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<v Speaker 1>it over at Bank of America Merrill Lynch. Enough to

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<v Speaker 1>relieve fed policymakers that the economy is not losing steam

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<v Speaker 1>as that may number may have suggested, but not enough

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<v Speaker 1>to eliminate worries about global downside risk. PIM yes, and

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<v Speaker 1>non farm payrolls rising by a seasonally adjusted two hundred

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<v Speaker 1>and eighty seven thousand in June. That's the strongest month

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<v Speaker 1>of hiring since last October. Right now, let's go to

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<v Speaker 1>Charlie Pellart in Bloomberg whose room for a Bloomberg business flat,

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<v Speaker 1>and thank him, Thank you, Kathleen, all about jobs are

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<v Speaker 1>Coverage continues right here on taking Stock, but markets responding

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<v Speaker 1>best level of the day right now, the now at

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<v Speaker 1>eighteen thousand, one hundred forty nine. It's up two hundred

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<v Speaker 1>fifty three points now again of one point four percent.

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<v Speaker 1>SMP five hundred index up thirty one again also of

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<v Speaker 1>one and a half percent, and has stack ups seventy

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<v Speaker 1>seven points again there of one point six percent. The

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<v Speaker 1>tenure of five thirty seconds yield one point three six percent.

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<v Speaker 1>As you guys mentioned, the Labor Department said employers added

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<v Speaker 1>two hundred eighty seven thousand jobs, far more than the

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<v Speaker 1>economists survey by Bloomberg were expecting. The jobless rate rose

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<v Speaker 1>to four point nine percent as more people entered the

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<v Speaker 1>labor force. Wages did advance less than projected. Bill Gross,

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<v Speaker 1>his fund manager at Janis Capital, He says June's strong

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<v Speaker 1>job report probably won't change the Federal Reserves decision on

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<v Speaker 1>when to raise interest rates. You know, they still have

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<v Speaker 1>Brexit to look into the eyes of the whites of

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<v Speaker 1>the Brexit eye. I guess they have problems with Italian banks,

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<v Speaker 1>so the Fed doesn't, but the uh, the e c

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<v Speaker 1>B and the you do, the problems with the UK

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<v Speaker 1>property mutual funds. Uh. You know, there's a sense of

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<v Speaker 1>illequdity and markets and and the Fed of course is

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<v Speaker 1>very obsessed and concerned with markets, and right now markets

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<v Speaker 1>are with the Dow Industrials up to sixty a gain

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<v Speaker 1>of one and a half percent, Gold down by a

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<v Speaker 1>dollar to thirteen sixty one to drop there of point

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<v Speaker 1>one percent. Crude oil holding about forty five dollars a

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<v Speaker 1>barrel up twenty one cents now forty five thirty six

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<v Speaker 1>on West Texas Intermediate, a gain of point five percent

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<v Speaker 1>to thirty two on Wall Street. Now, let's take a

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<v Speaker 1>look at other news from around the world. Thank you,

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<v Speaker 1>Charlie from the Bloomberg news room. I'm Ramy in a Cento.

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<v Speaker 1>One of the suspected gunmen in an ambush that left

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<v Speaker 1>five Dallas police officers dead has been identified as twenty

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<v Speaker 1>five year old Micah Xavier Johnson. That's according to reporting

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<v Speaker 1>in multiple media outlet. Johnson reportedly served in the Army

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<v Speaker 1>Reserve as a carpentry and masonry specialist. He was killed

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<v Speaker 1>by an explosive strap to a police robot after hours

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<v Speaker 1>of negotiating with police. Three other suspects are being detained

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<v Speaker 1>by police. Texas Attorney General Ken Paxton is calling the

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<v Speaker 1>attack on Dallas police calculated. He told ABC News people

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<v Speaker 1>should be on the lookout for potential copycats. People need

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<v Speaker 1>to be on guard for potential attacks and other places

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<v Speaker 1>and and maybe here, So I think we're definitely on

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<v Speaker 1>a higher alert here and around the state. President Obama

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<v Speaker 1>is in Poland, where he commented on the shootings is

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<v Speaker 1>that there has been a vicious, calculated and despicable attack

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<v Speaker 1>on law enforcement. Police and ballast were on duty during

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<v Speaker 1>doing their jobs keeping people safe during peaceful protests. Mr

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<v Speaker 1>Obama also called last night a wrenching reminder of the

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<v Speaker 1>sacrifices law enforcement officers sometimes have to make. Five officers

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<v Speaker 1>were killed and seven others were wounded. A judge in

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<v Speaker 1>the George Washington Bridge Lane closing case has ruled against

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<v Speaker 1>providing access to Governor Chrissie's cell phone as part of

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<v Speaker 1>pre trial preparation. The U. S. District judge granted a

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<v Speaker 1>motion by the law firm representing Chrissy's office to quash

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<v Speaker 1>a subpoena by former allies Bill Brownie and Bridget Kelly.

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<v Speaker 1>Global News twenty four hours a day, powered by more

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<v Speaker 1>than twenty journalists and analysts in more than one under

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<v Speaker 1>twenty countries from the Bloomberg News Room. I'm Rami in

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<v Speaker 1>a centio Charlie, and we thank you, and again recapping

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<v Speaker 1>down industrials up two hundred sixty one points, a gain

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<v Speaker 1>of one and a half percent, SMP five hundred index

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<v Speaker 1>advancing thirty two points again narr of one and a

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<v Speaker 1>half percent. I'm Charlie Pellett, and that's a bloom Bird

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<v Speaker 1>business flash during listening to taking Stock with pin Box

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<v Speaker 1>at Gatlee Hayes on Bloomberg Radio at tightening job market,

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<v Speaker 1>it's put up with pressure on wage growth as employers

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<v Speaker 1>compete for an ever smaller pool of a A level workers.

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<v Speaker 1>Average hourly earnings for private sector workers rose by a

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<v Speaker 1>modest two cents two cents in June dollars and sixty

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<v Speaker 1>one cent satis of about two and a half percent

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<v Speaker 1>compared to a year earlier, but the wages were up

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<v Speaker 1>two and a half percent compared to matching the fastest

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<v Speaker 1>annual growth rate since July two thousand nine. Here to

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<v Speaker 1>tell us what this means for markets in the economy,

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<v Speaker 1>Ethan Harris, Head of Global Economics, Bank of America, Merrill

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<v Speaker 1>lynch Ethan Harris, thanks for being with us, so I

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<v Speaker 1>give us your impression of the wage growth and what

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<v Speaker 1>that would mean for GDP growth in the United States. Well,

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<v Speaker 1>I think what we're saying now is the beginnings of

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<v Speaker 1>the end of the job recovery. In other words, the

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<v Speaker 1>beginning of a period where workers get a little bit

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<v Speaker 1>of negotiating power, a way to start picking up a bit. Um.

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<v Speaker 1>You know, we've been stuck at two percent wage growth

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<v Speaker 1>for years now. Now we've moved up to about two

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<v Speaker 1>and a half. I think it's going to take a

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<v Speaker 1>couple more years of health jobs to get into more

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<v Speaker 1>normal three and a half percent or so wage games.

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<v Speaker 1>But you know, I think we're finally there at that

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<v Speaker 1>late stage of the cycle where workers get get a

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<v Speaker 1>more balanced relationship with their employers. Um. This is good

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<v Speaker 1>news for the economy. UM. It's telling you that there's

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<v Speaker 1>been a real healing process here. It's taken a long time,

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<v Speaker 1>but UM, you know, FED policy is working. It's just

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<v Speaker 1>working very slowly. So basically, um uh Ethan, when you

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<v Speaker 1>look at the trajectory of jobs growth, it was stronger

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<v Speaker 1>at the end of by a good margin. And that's

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<v Speaker 1>why the FED. One of the reasons when they came

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<v Speaker 1>in looking to high grates four times this year, UM

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<v Speaker 1>by Marcia, was all the market and certainty right, and

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<v Speaker 1>they cut back, but that the pace of job growth

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<v Speaker 1>is also lost momentum. This was not a particularly strong

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<v Speaker 1>it wasn't such a weak quarter for jobs growth, but

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<v Speaker 1>it's one of the least strong we've had in some time.

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<v Speaker 1>How are you sure that there isn't a loss of

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<v Speaker 1>momentum here? That is going to be vulnerable too, As

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<v Speaker 1>you point out in your your note today global downside risk,

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<v Speaker 1>you say that things will be watching that well. I

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<v Speaker 1>think if you look at broadly at the data in

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<v Speaker 1>the last few months, actually there's been a slight pick

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<v Speaker 1>up overall, So I think you're right that payrolls have

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<v Speaker 1>slowed down fundamentally. I mean they're now running it about

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<v Speaker 1>a hundred and fifty thousand a month on average, and

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<v Speaker 1>they were running and well above two hundreds. So there's

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<v Speaker 1>been some loss of momentum there. I don't think that

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<v Speaker 1>that was sustainable to be creating that number of jobs

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<v Speaker 1>in an economy growing two But if you look at

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<v Speaker 1>the rest of the economy, you look at better retail sales,

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<v Speaker 1>better survey measures like the Purchasing manager survey, um overall

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<v Speaker 1>g d P in the second quarter looks like about

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<v Speaker 1>two point six percent growth. So you know, there's a

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<v Speaker 1>little bit of improvement going on in the underlying data,

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<v Speaker 1>even with the labor market slowing down a bit. All right,

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<v Speaker 1>so improvement there. But tell us about the manufacturing sector

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<v Speaker 1>and inventory bills, because it seems as other manufacturing sector

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<v Speaker 1>has been moving in a different direction than the service economy. Yeah,

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<v Speaker 1>I mean we're still feeling the effects I think of

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<v Speaker 1>the strengthen the dollar last year. Um, I mean, this

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<v Speaker 1>is a tough environment for manufacturing. You had very sharp

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<v Speaker 1>move up in the dollar, making us products less competitive globally.

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<v Speaker 1>It was also an environment where you had a collapse

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<v Speaker 1>in the mining sector, which uses a lot of manufactured products.

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<v Speaker 1>So the mind of the manufacturing sector is kind of

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<v Speaker 1>in a very slow motion recession. The rest of the

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<v Speaker 1>economy is doing fine though, and remember manufacturing is only

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<v Speaker 1>a little over ten percent of the economy, so it

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<v Speaker 1>doesn't normally drive the economy, even though it can be

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<v Speaker 1>quite volatile. Even uh, speaking of the feder Reserve, the

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<v Speaker 1>Marcus don't see a rate height the rest of this year.

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<v Speaker 1>And you get this this September on our our w

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<v Speaker 1>I r P page on on the Bloomberg and there's

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<v Speaker 1>still not an implied probability that gets to is the

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<v Speaker 1>market wrong or are we in some kind of stasis

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<v Speaker 1>where yeah, jobs are growing and maybe we just will

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<v Speaker 1>rise a little bit more, but inflation is not going

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<v Speaker 1>to rise much, and the Fed's going to look every

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<v Speaker 1>month and say, dang, we'd like to move right set,

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<v Speaker 1>but we don't, we can't or we don't need to. Yeah, well,

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<v Speaker 1>maybe you need to rename that the r I P.

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<v Speaker 1>Because it seems like the FED is dead. But all right,

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<v Speaker 1>pretty good joke there, right, Um, But I would say

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<v Speaker 1>that the market is slightly under pricing the Fed. I mean,

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<v Speaker 1>we think the Fed by December will be ready to

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<v Speaker 1>do another hike. Um, so you know they'll move. Well,

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<v Speaker 1>that sounds like a big difference from the markets, but

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<v Speaker 1>it's not that big a difference. What's going on right

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<v Speaker 1>now the FED is that they want to be able

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<v Speaker 1>to check all the boxes before they move. They want

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<v Speaker 1>to be able to say the job markets okay, the

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<v Speaker 1>economy is okay, inflation is picking up a bit, and

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<v Speaker 1>they want to be able to say there's no systemic

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<v Speaker 1>problems in the global economy or markets. When they feel

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<v Speaker 1>comfortable with all three of those things, then they move

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<v Speaker 1>ahead and hike interest rates. And that's why I don't

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<v Speaker 1>think they're likely to hike in the next few months,

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<v Speaker 1>because they really wanted some time to kind of get

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<v Speaker 1>get these wounds behind us um. But I do think

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<v Speaker 1>eventually they'll hike again. The bond market. I think, you know,

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<v Speaker 1>it's a little too optimistic about the Fed being completely

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<v Speaker 1>out of the picture. All right, Heathen here, thank you

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<v Speaker 1>so very much for joining us today. Head of b

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<v Speaker 1>of A Maryland Global Economics even says the economy, this

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<v Speaker 1>is a good news report today in jobs, solid footing,

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<v Speaker 1>moving ahead, a little bit, better wages, and he's looking

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<v Speaker 1>for that interest rate increase from the Federal Reserve in December.

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<v Speaker 1>This is taking stock and this is Bloomberg. The Hampton's

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