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Speaker 3: The July jobs report crossing the Bloomberg terminal right now,
Speaker 3: and it shows that the US economy actually lost twenty
Speaker 3: three thousand jobs in the month of July. This is
Speaker 3: a lot less than the eighty thousand we were expecting
Speaker 3: to be added, and we added fifty seven thousand in
Speaker 3: the month of June. Moving to the unemployment rate, it
Speaker 3: dipped to four point one percent versus the prior month's
Speaker 3: four point two percent. The expectation was for four point
Speaker 3: two percent. Labor force participation rate coming in at sixty
Speaker 3: one point four percent. The month before it was sixty
Speaker 3: one and a half percent, and that's a bit lower
Speaker 3: than the expectation. Want to move over to the wage
Speaker 3: component here, which provides more clues on inflame. Average hourly
Speaker 3: earnings a month over month up just a tenth of
Speaker 3: a percent, a scant tenth of a percent. Average hourly
Speaker 3: earnings year over year up three point two percent. The
Speaker 3: expectation was for three and a half percent, so again
Speaker 3: a big surprise to the downside the economy losing twenty
Speaker 3: three thousand jobs in the month of July. The expectation
Speaker 3: was for an edition of eighty thousand. I want to
Speaker 3: take a quick look at how the market is reacting.
Speaker 4: Here.
Speaker 3: Looks like futures, guys, at least for the moment, hanging
Speaker 3: on to those earlier games.
Speaker 5: Back over to you, Alexis, thank you so much.
Speaker 6: The markets movie as you can imagine, equities lift here,
Speaker 6: thinking free money will be out there in a lower
Speaker 6: rate environment. The yield space is the most elastic, and
Speaker 6: you see it in the two year yield in a
Speaker 6: solid nine basis points four point one six percent, basically
Speaker 6: halfway back to that coveted three point ninety nine thirty
Speaker 6: year bond. Doesn't come in as much as you'd expect,
Speaker 6: but nevertheless, from a five twenty two into five point
Speaker 6: one to nine two percent. Damien, your thoughts on the
Speaker 6: set of numbers here the revisions extremere.
Speaker 7: Yeah, yeah, no, I mean exactly. We have a revised
Speaker 7: down for the last for the last print of twenty
Speaker 7: thousand from fifty seven and this negative twenty three print.
Speaker 7: You would think we'll get some people's attention, but to well,
Speaker 7: let's see this point. It looks like equities are kind
Speaker 7: of looking through it for the minute. And I don't
Speaker 7: want to call this a nothing burger by any stretch.
Speaker 7: I mean, Claudia, I mean you know this. This, I'm
Speaker 7: wonderful it is going to move markets.
Speaker 6: We'll have to see her, Claudia Summer, letting her digest
Speaker 6: the data here a little bit. I do want to say,
Speaker 6: with the ECO screen that we have at Bloomberg, the
Speaker 6: change in non firm payrolls was negative twenty three versus
Speaker 6: a survey of eighty some people were there. But the
Speaker 6: two months payroll adjustment and negative one to ozh three,
Speaker 6: that's combined negative one hundred twenty six.
Speaker 5: I think we've given her enough time.
Speaker 6: Claudia sum joins us here to provide perspective. Claudia, this
Speaker 6: must change the debate at the FED.
Speaker 4: So first, does this remind you of anything? I mean
Speaker 4: a year ago exactly this employment report was when we
Speaker 4: had the very large downward revision, the downside surprise, the
Speaker 4: downward revisions, and the BLS commissioner lost her job. Right,
Speaker 4: So now, just looking quickly and I can't you know,
Speaker 4: do all the details of this government education government education
Speaker 4: was a big decline and one of the things that
Speaker 4: happens in the summer. It can be really tough with
Speaker 4: like the school calendars, and if things slip a little
Speaker 4: bit with the seasonal adjustment, you can get some kind
Speaker 4: of squorely numbers in terms of the education. That certainly
Speaker 4: is at play for the downside MYSS today. That was
Speaker 4: something that was very clear in last year's numbers as well,
Speaker 4: So I don't want to, you know, dismiss this. And
Speaker 4: of course that was a shift from we'd had a
Speaker 4: strong labor market to like, WHOA, maybe it's not so strong.
Speaker 4: So I do think there is signal here. There's probably
Speaker 4: a fair bit of noise and some seasonal issues that'll
Speaker 4: look through. The unemployment rate did tick down, right. I
Speaker 4: think the one thing that for the FED that maybe
Speaker 4: of most interest is wages coming in soft.
Speaker 6: I'm getting out my HP twelve C calculator because Constance Hunter.
Speaker 6: I wouldn't do this for Claudia, but Constance Hunter jumped in,
Speaker 6: here's we're going to do.
Speaker 5: Can we do this in the control room?
Speaker 6: Can we rip up the script that have Claudia and
Speaker 6: Constans together?
Speaker 5: Is that did you check with their people, Yeah, they
Speaker 5: say it.
Speaker 6: Okay, consense hunter getting wired up right now, getting folks
Speaker 6: futures up thirty two the advanced Nasdaq lifts double up
Speaker 6: eight tenths of a percent. Here in the yield again,
Speaker 6: the two year yield is the most elastic in it
Speaker 6: of four point one six percent. Damian ask a smart
Speaker 6: question to doctor some Well, I figure out the three
Speaker 6: months moving average on my HP twelve C.
Speaker 7: Well, Dr Salm, I mean average hourly earning is down
Speaker 7: zero point one percent month over month. I mean, you
Speaker 7: know you mentioned the Beige Book before the break, right,
Speaker 7: and you know what did the Beige Book show us
Speaker 7: that consumers are adjusting by taking on more debt, buying
Speaker 7: less but shopping more frequently trading down to cheaper alternatives.
Speaker 7: Is this really wearing on them now? I mean what
Speaker 7: does this all mean for the consumer?
Speaker 4: So on the consumer side, this this is not good news.
Speaker 4: I mean, paychecks are such a key driver of consumer span.
Speaker 4: I'm not the only driver, but this is a soft
Speaker 4: a soft eating. I think the one where you know,
Speaker 4: the implications maybe come out the strongest for this is
Speaker 4: on the FED side. You know, the thing that would
Speaker 4: get the Fed moving towards rate hikes the fastest. Where
Speaker 4: if there was any sign of overheating in the labor market,
Speaker 4: this is exactly the opposite of overheating. We hadn't seen
Speaker 4: wage growth really picking up, but we really hadn't seen
Speaker 4: it slowing down much. And so this really takes like
Speaker 4: the labor market isn't pushing up inflation, and frankly, if
Speaker 4: it softens it it might help hold down some of
Speaker 4: that inflation.
Speaker 5: We are so advantaged.
Speaker 6: Claudia Samnus Century Advisors and joining us now Constance Hunter,
Speaker 6: chief economists EIU. The two of them together commercial free
Speaker 6: across America in this half hour on yield. Christina kat
Speaker 6: Menu of Investigo will join us here and a bit
Speaker 6: Constant Hunter. You're over there working on the terminal looking
Speaker 6: at the numbers. I got a ninety day average, a
Speaker 6: three month moving average subject to revision, of twenty thousand per.
Speaker 5: Month on jobs.
Speaker 6: You can give me in all your academics, Claudia samac
Speaker 6: I don't care politically in America. In defense of the president,
Speaker 6: that's an unacceptable statistic for America to see a three
Speaker 6: months moving average of twenty thousand jobs per month. It
Speaker 6: doesn't get it done well.
Speaker 1: We don't think it gets it done. I'm gonna take
Speaker 1: off my headphones.
Speaker 5: Please take please take time.
Speaker 1: Okay, I'm echoing in there, echoing. I'm back on to
Speaker 1: hear Claudia. But in any case, you know, last year
Speaker 1: when we had changes to immigration, when we were deporting
Speaker 1: a number of people, there was widespread spread speculation that
Speaker 1: actually the monthly requirement had fallen. This year, what we
Speaker 1: saw with jobs, with payroll numbers increasing monthly, but the
Speaker 1: unemployment really not coming down significantly. Is that well, maybe
Speaker 1: it's higher this year thousand over the last three months,
Speaker 1: and then that fall in the unemployment rate that is
Speaker 1: not That is not a good look for the president.
Speaker 1: You're right, and it bolsters his case to cut rates.
Speaker 1: He's going to keep beating that drum. I think this
Speaker 1: bolsters our call for a hold. This is this is
Speaker 1: definitely a warrants a hold.
Speaker 6: Does this study that we're seeing right now? Can government
Speaker 6: officials in the FED get out front or they colossally
Speaker 6: ex post where they just have to wait for the
Speaker 6: data before they go flat or cut rates.
Speaker 4: So, I mean, policymakers never have a full picture of
Speaker 4: the economy when they make a decision. It just it
Speaker 4: takes too long, and there's always we always want one
Speaker 4: more piece of data, one more piece of information. But
Speaker 4: when you have enough questions or you have enough tension,
Speaker 4: that can that certainly can be you know, a reason
Speaker 4: to move a little more slowly until you get a
Speaker 4: decisive signal. I mean, I don't. I don't think today's
Speaker 4: data are decisive and in reshaping that we've had a
Speaker 4: largely balanced labor market so far this year, but they
Speaker 4: raise some concerns and we'll, you know, get more on inflation.
Speaker 4: We'll see if the distinplation is sticking or not. So
Speaker 4: you get what you have and you have to make
Speaker 4: a decisions.
Speaker 5: She decid, she did, she's such a pro. Today's date
Speaker 5: it wasn't decisive.
Speaker 6: Is there ever an economist who's ever said that today's
Speaker 6: dat has decided? Damien Sasawer with Constants Hunter and Claudius Constant.
Speaker 7: I mean, I'm just looking at so for futures here,
Speaker 7: I mean I see whites up a tick to a
Speaker 7: tick and a half, Reds are up two and a half,
Speaker 7: three ticks. I mean, so you know obviously what we're
Speaker 7: seeing here or yields down, price up, and is that
Speaker 7: the right Uh, you know, is that the right reaction
Speaker 7: to this? And just how much do you think the
Speaker 7: market's going to rush to price September out of the equation.
Speaker 7: Is that what we're looking at here.
Speaker 1: I think the market will begin to price September out
Speaker 1: of the equation. I think Claudia is right. Tom. I
Speaker 1: was almost going to say, you never look at just
Speaker 1: one number, and of course you don't, but you preface
Speaker 1: your question on the three month moving average, right, And
Speaker 1: I think that's what we're talking about here. One piece
Speaker 1: of concern, right, is you saw the unemployment rate fall
Speaker 1: for bad reasons, not good reasons to study participation felt
Speaker 1: people exams?
Speaker 5: Who would that be? Folks?
Speaker 6: Because of that where the unemployment rates goes down for
Speaker 6: bad reasons discuss doctor Hunter.
Speaker 1: Well, certainly, if you see that participation rate decline, it's
Speaker 1: only one tenth, but it's enough that we saw this
Speaker 1: load growth of jobs and we saw the unemployment rate fall.
Speaker 1: It suggests to you that either there's low supply along
Speaker 1: with load demand that is not a robust labor market situation.
Speaker 1: And you know, I was looking before I came on
Speaker 1: last night. I was I got buried in data as
Speaker 1: I as I sometimes do. And if you look at
Speaker 1: the FEDS Financial Conditions Index there, it suggests it suggests
Speaker 1: that we have tailwinds. Now those tailwinds are diminishing, but
Speaker 1: it suggests that monetary policy is loose here. And if
Speaker 1: we have loose monetary policy and a budget deficit of
Speaker 1: six percent and this is the best we can do,
Speaker 1: I think it begs asking some questions about the underlying economy.
Speaker 7: Yeah, I mean, look constant, and the equity market agrees
Speaker 7: with you. I mean, it is rallying here.
Speaker 5: I mean they see exactly what you see.
Speaker 7: This is an excuse for them to price out rate hikes,
Speaker 7: to basically get dubvish, and that is great for high
Speaker 7: for for sky assets. And so you know, shifting to you,
Speaker 7: I mean, Claudia just talked to us a little bit
Speaker 7: more about what's the FOBT. I mean, does this take
Speaker 7: some of the balance out of what next week's inflation
Speaker 7: print is going to look like? I mean, what are
Speaker 7: you looking for next? What's the next big figure that
Speaker 7: you're going to lean into? Data wise?
Speaker 5: Well?
Speaker 4: Absolutely, the inflation data are front and center right and
Speaker 4: you want to see we got a very soft inflation
Speaker 4: read for June. We don't expect that to show up
Speaker 4: again in July exactly that way. But you want to
Speaker 4: see some softness or at least getting back to something
Speaker 4: that's consistent with target right, and so there'll be a
Speaker 4: lot of attention to the CPI, the PPI, the import prices.
Speaker 4: I mean, inflation is still front and center, because inflation
Speaker 4: is still very far from the FEDS target and you
Speaker 4: need and if nothing else, you want to see it
Speaker 4: move in the right direction. Today we're seeing employment move
Speaker 4: and not the right direction. Maybe next week we'll get
Speaker 4: some better news on inflation, but I don't think this
Speaker 4: takes any pressure off of the CPI. And before this
Speaker 4: that meets again, we're gonna get one more payroll and
Speaker 4: we've got next week's CPI and another one. So there's
Speaker 4: a lot of data to.
Speaker 6: Come across America, a real treat together. Claudia sam with
Speaker 6: us today from News Century Advisors and Constance Hunter of
Speaker 6: EIU off the Shock report. We're up, Futures up thirty
Speaker 6: nine now, Nasdaq is up a solid stick one percent
Speaker 6: on the Nasdaq futures, so even Bitcoin vaults up seven
Speaker 6: hundred dollars. Constance demand that I quote Pelly Winners l
Speaker 6: one fifty seven on Brench crude right now in the
Speaker 6: most elastic yield. The two year of four point one
Speaker 6: five percent in a solid nine basis points, I'm going
Speaker 6: to call that a ginormous movement, even the ten year
Speaker 6: in seven basis points. I want to go to your
Speaker 6: two wheelhouses, Claudia. Let me begin with you, with all
Speaker 6: of your deserved acclaim over recession. We've had a pop
Speaker 6: phenomenal GDP. John writing over Breen notes consumption and investment
Speaker 6: eight ish percent, like a banana republic.
Speaker 5: Do you just assume that if.
Speaker 6: We have a tepa job economy and we don't cut
Speaker 6: rates fast enough, that nominal the animal spirit comes.
Speaker 5: Down to a more lower normal rate.
Speaker 4: So I am concerned if the labor market isn't firing
Speaker 4: on all cylinders, and certainly if it weakens, that would
Speaker 4: be an issue. And we've seen we got recent data again,
Speaker 4: I mean the labor share continues to drop, like the
Speaker 4: share of the income and the economy going to workers.
Speaker 4: That does not feel like a good situation. And I
Speaker 4: think to Constance's point, I worry more right now about
Speaker 4: the structure underpinning the economy than maybe the cyclical the boombus,
Speaker 4: the recess. It's like things are moving under the hood
Speaker 4: of the labor market, and I think that's the labor
Speaker 4: force growth, population, aging, what's happening with AI. So there's
Speaker 4: some really big themes that I think we should pay
Speaker 4: attention to, and maybe less to the boom bus cycle, right,
Speaker 4: because I'm not sure that's the biggest thing happening right now.
Speaker 5: Kind of sance.
Speaker 6: The EIU remit is a wonderful global remit. What does
Speaker 6: this job report signal to other central banks? I mean,
Speaker 6: it simply takes away the effervescence, doesn't it.
Speaker 1: You know, I would say other central banks are going
Speaker 1: to look much more closely at CPI data next week
Speaker 1: than they are. The jobs to data agree, But of
Speaker 1: course it does. To Claudia's point, right, it's what's going
Speaker 1: on under the hood here, and we have an aging
Speaker 1: labor market, we have an aging population. We're seeing people
Speaker 1: age out of the labor market. That is not a
Speaker 1: unique problem to the United States, right. We see this
Speaker 1: around the world. This is a challenge for central banks,
Speaker 1: and one could argue that is the biggest challenge for
Speaker 1: Japan and one of the reasons why we have the
Speaker 1: situation in Japan where they have a very high budget
Speaker 1: deficit or debt to GDP ratio, right, and there's concern
Speaker 1: about that fiscal situation and it was getting expressed in
Speaker 1: the currency, and we had the intervention that we had
Speaker 1: last week. So this theme of you know, what, how
Speaker 1: do you grow an economy with an aging population? Does
Speaker 1: AI help or hinder that These are as existential questions.
Speaker 1: I think that all economists, central bankers are not are
Speaker 1: looking at when they're looking at economies right now.
Speaker 7: And yet there's a desire to keep financial conditions loose
Speaker 7: here in the US, like you rightly point out, I mean,
Speaker 7: talk to us about what you learned from yesterday's refunding announcement.
Speaker 7: I mean they just in my mind kick the can
Speaker 7: down the road again, right, I mean, like, so, you know,
Speaker 7: your right to focus on fundamentals like debt to GDP
Speaker 7: here in the US, but the market has not paid
Speaker 7: attention to that for so long. You know, at what time,
Speaker 7: you know, the things at least start to flash amber
Speaker 7: to you constantly.
Speaker 1: So worsh has his task forces, We have our task forces.
Speaker 1: So there's a few things we're looking at that we
Speaker 1: felt we had to really do a deep dive. And
Speaker 1: to your point, Tom, across country comparison right up there
Speaker 1: is what is fiscal space? What constitutes fiscal space? When
Speaker 1: does it get tricky?
Speaker 4: Who?
Speaker 8: Who?
Speaker 9: You know?
Speaker 1: Obviously we see it's not uniform across countries, and so
Speaker 1: I think one of the things we have to think
Speaker 1: about here is are what is expected in fression and
Speaker 1: how does that feed into term premia and then what's
Speaker 1: that back loop to funding the government?
Speaker 6: Christina Campmenian does her people are quite upset, you know,
Speaker 6: I mean she needs more air time, Claudia. So last
Speaker 6: question to you, with immense respect for your academics, and
Speaker 6: it's just simply you're launching forward. I guess the end
Speaker 6: of August Jackson Hole and into September as well. It's
Speaker 6: still to America's the political reality. Kevin Hassett with Bloomberg
Speaker 6: in the ten o'clock our folks, Michael McGee and Danny Berger.
Speaker 6: I'm sorry, Claudia. And in economics on a job's day,
Speaker 6: it's two distinct Americas, isn't it.
Speaker 4: There's a lot of division in the labor market. I
Speaker 4: mean the division I like to focus on is this
Speaker 4: low higher, low fire economy, right for workers who have
Speaker 4: a job, like their job. It's a good job. This
Speaker 4: is this still is a pretty good labor market. Today's
Speaker 4: number is notwithstanding for people trying to get back in,
Speaker 4: trying to get them for the first time. This is tough.
Speaker 4: And this wage growth is not keeping up with the
Speaker 4: price growth, and that's a bigger that's a bigger problem.
Speaker 4: So yeah, there's a lot of divisions here.
Speaker 5: I love the wage growth idea. This is a this
Speaker 5: is why we do this. This is good.
Speaker 6: Thank you so much for the doctor Sam, Thank you
Speaker 6: so much. New Century Advisor. Both of them very active
Speaker 6: on LinkedIn. Look for their publishing out here. Today we
Speaker 6: have also, you know, I love it when world class
Speaker 6: talent calls it and says.
Speaker 5: Me, me, me, me me, Can I get on together?
Speaker 6: Are tentatives Stephanie Roth's schedule to be with us and
Speaker 6: from City Group Andrew holland Orse, who nailed this call.
Speaker 6: We're trying to line them up right now. We have
Speaker 6: to go through a I mean, I mean hollin Ors
Speaker 6: is like, great, you just call.
Speaker 5: A cell phone. I picks right up here. Definitely, Roth, You've.
Speaker 6: Got to go through like six layers of compliance joining
Speaker 6: us right now Christina, thank us for being patient off
Speaker 6: the shock economics. How does this economics play into a
Speaker 6: two year full faith and credit market.
Speaker 10: Look, I mean, the market is sitting here and we've
Speaker 10: been all trying to understand what is the new reaction
Speaker 10: function of the FED. Chair of the FED Committee under wars.
Speaker 5: And he wants it to be data.
Speaker 10: I don't know if we know what he wants it
Speaker 10: to be quite yet. I think the jury is still
Speaker 10: out there, and I think July was very different than June,
Speaker 10: so we'll see. But the market is grappling with all
Speaker 10: of these data prints, and we've taken out, certainly pricing
Speaker 10: for September and you're pricing now what just about one
Speaker 10: full hike only by December?
Speaker 7: So right, So, I mean, I know you guys are
Speaker 7: short duration over there at investment. I know you, like
Speaker 7: Steep Nares talked to us about how does this change
Speaker 7: the the you know, your outlook at all over in
Speaker 7: ear term.
Speaker 10: Look, I think there are a few things. Again, if
Speaker 10: we go back to this new regime from the FED
Speaker 10: right and talking about letting the market do the work,
Speaker 10: I think that introduces a lot more volatility, and especially
Speaker 10: in the back end of the curve. So I think
Speaker 10: that still means that you are looking for higher yields,
Speaker 10: higher yields out the curve and steepercurve. We haven't broadly
Speaker 10: this year, You've seen a lot of flattening of the curves.
Speaker 10: So I think that that still holds. And the tremendous
Speaker 10: amount of AI and hyperscaler issuance weighs on that too.
Speaker 10: And I know you guys have been talking about that
Speaker 10: today and it's been a theme. But you have these
Speaker 10: companies that are issuing the size of government bond deals
Speaker 10: weighing on the market. So I think we are still warranting,
Speaker 10: needing higher yields out the curve.
Speaker 7: So Christina, you know, I'm an emerging market fixed income guy.
Speaker 7: I look at em credit, I look at the basis
Speaker 7: to investment grade spreads, and I look at it and
Speaker 7: I say, wow, ten basis points. Wow, that is as
Speaker 7: tight as I have ever ever seen it. And I
Speaker 7: think you're absolutely right to hit on that. I think
Speaker 7: you're to date what three hundred billion in hyper scale
Speaker 7: we call it AI issuance. Going forward, I mean it's
Speaker 7: not going to go away, right, I mean they just
Speaker 7: roll this over ad to it. I mean at what
Speaker 7: point do you see the crowding out effect that many
Speaker 7: many strategists and analysts are calling for.
Speaker 10: Here, So we have been again when we look at
Speaker 10: our portfolios and we manage global portfolios, we have the
Speaker 10: three lovers of rates, credit and FX. Credit is where
Speaker 10: we've leaned on the least just because of how tight
Speaker 10: spreads are. And I know that's kind of been unpopular opinion,
Speaker 10: and corporates have continued to perform well and stay tight,
Speaker 10: but I think that's where there's the most kind of
Speaker 10: jump risk and concern. And I think it's been supported
Speaker 10: by this appetite for all in yields just given levels.
Speaker 10: But like you have to take a step back and say, A,
Speaker 10: you have this change in regimes, which should mean higher
Speaker 10: even government bonds. You are it's not the end of
Speaker 10: the issuance out of these issues. So there's more to come.
Speaker 10: And we've been at such compressed yield levels for so long,
Speaker 10: So talking about can a tenure be at five and
Speaker 10: a quarter?
Speaker 5: Sure?
Speaker 10: Is that in the potential?
Speaker 7: So you know, we talk about the different factors which
Speaker 7: drive total returns and fixed income. You've got duration, you've
Speaker 7: got spread, you've got coupon income, you have FX, right,
Speaker 7: so talk to us about you know exactly what you do.
Speaker 7: If you don't like duration and you don't like spreads,
Speaker 7: does that mean you're shifting and you're kind of leaning
Speaker 7: into currency risk here?
Speaker 10: So currency risk has definitely been kind of top of mind,
Speaker 10: I'd say, of the last two years. It's certainly I
Speaker 10: know something Tom and I have been talking about of
Speaker 10: like Asia is so miss priced, Asia so much price,
Speaker 10: and it's that kind of what has been most miss
Speaker 10: price has been frustrating and obviously has gotten more play
Speaker 10: in the last week and a half with official yen
Speaker 10: intervention in the Korea move. But yeah, I think we
Speaker 10: are sitting in an environment where people, even coming out
Speaker 10: of the July meeting say, Okay, from an FX perspective,
Speaker 10: we're in this multipolar world. There are different things driving it.
Speaker 10: So can we lean into em kerry and at least
Speaker 10: until we get music to my kind of to the
Speaker 10: to the next FED meeting, we have this holding period,
Speaker 10: we have a lot of data. This is obviously a shift,
Speaker 10: but like, let's take a step back to and say,
Speaker 10: when we came to the beginning of the year, people
Speaker 10: were talking about is breaking even payrolls zero twenty five fifty.
Speaker 10: So yes, this is a big reset from where we
Speaker 10: were running the first three months of the year. But
Speaker 10: maybe that thesis actually hasn't changed, so it's not as robust.
Speaker 6: But this is not this is just wonderful force, Claudia.
Speaker 6: So I'm with this kind of sense hunter to Christina
Speaker 6: camp Many who looks at yield where their global reach
Speaker 6: and we've got scheduled Stephanie Roth and Andrew Hollenhorst we're
Speaker 6: working on right now. It's City Group. I want you
Speaker 6: to take the yield shop here. I got too many
Speaker 6: economists lined up. We got to get some real conversation
Speaker 6: and with Christina camp Many as well. Do you have
Speaker 6: an underlying disinflation and real GDP growth vectors that are
Speaker 6: lower that will support a lower yield environment.
Speaker 10: Look, I think that there are disinflationary trends that were
Speaker 10: in place at the beginning of the year. Again, if
Speaker 10: you zoom back to where we were in January, before
Speaker 10: Middle East situation kind of became front and center. That
Speaker 10: was the thes housing to come down, like a lot
Speaker 10: of these things to come down. Again, we're back in
Speaker 10: the world with a lot of uncertainty. We don't know
Speaker 10: what the situation in the Middle East is. We don't
Speaker 10: know where oil will end up. It has been shoppy,
Speaker 10: it has come down. I think at food sitting at
Speaker 10: eighty is something that the economy can sustain at one twenty.
Speaker 4: That's very different.
Speaker 10: And I think what the FED is trying to weed
Speaker 10: through in all of us in the markets and all
Speaker 10: the economists are what is most concerning, most likely for
Speaker 10: the FED is the kind of COVID style rollover that
Speaker 10: you're seeing it into wages and into pricing power in
Speaker 10: the economy, and that which we haven't seen yet, but
Speaker 10: it's something that people are concerned about.
Speaker 5: It's nuts. It's nuts, is what is my scientific analysis.
Speaker 6: Christina Kemedi, thank you so much with Invesco, with great
Speaker 6: perspective there again that benchmark two year yield four point
Speaker 6: one seven percent now in eight basis points. Some perspective
Speaker 6: from Andrew Hallenhorst, who has to publish into Friday and
Speaker 6: more importantly get a research note ready for Monday morning.
Speaker 6: What paragraphs will you chang and most abruptly, Andrew of
Speaker 6: a Monday research report.
Speaker 8: Yeah, So, I think the big thing I'm going to
Speaker 8: be emphasizing is that we are running slower job growth
Speaker 8: on an underlying average basis. We have a lot of
Speaker 8: noise around that looking at these numbers, that's kind of
Speaker 8: what we thought was happening. It's the second month on
Speaker 8: that we've got in these huge downward revisions the last
Speaker 8: two months. So two months ago we were sitting at
Speaker 8: one hundred and eighty eight thousand three month moving average
Speaker 8: job growth. Yes, that number this morning just twenty thousand,
Speaker 8: So it's come down quite substantially.
Speaker 6: And to give me your study of that, the political
Speaker 6: realities of Kevin Hassett at at ten o'clock hour this morning,
Speaker 6: that number, a three month moving average is completely inappropriate
Speaker 6: for any politician in America.
Speaker 8: Yeah, I don't think that it's an acceptable long term
Speaker 8: job growth number. There is a question about you know,
Speaker 8: is population growth just so slow now that you can
Speaker 8: reconcile that with keeping the unemployment rate relatively unchanged. Didn't
Speaker 8: come down this morning with the participation rate falling. But
Speaker 8: this is this is where it gets tricky for the FED. Right,
Speaker 8: We're used to hearing over the last few months a
Speaker 8: federal reserve that could almost operate as a single mandate FED,
Speaker 8: and we just heard a lot about inflation and inflation
Speaker 8: being above target, that discussion of downside risk to the
Speaker 8: job market had really kind of left the conversation. So
Speaker 8: I'm interested to see now after this report we start
Speaker 8: to get a little bit more of that trickling back in.
Speaker 7: Andrew, I have just I mean, like, this looks like
Speaker 7: a perfect report for the Trump administration, right, I mean,
Speaker 7: you had positive construction of manufacturing figures inside the data,
Speaker 7: and you basically got, you know, the data kind of
Speaker 7: to do a bit of worse's heavy lifting for them,
Speaker 7: right and price out some of these hikes. I mean,
Speaker 7: talk to us a little bit about where the White
Speaker 7: House stands with this.
Speaker 8: It really really takes the pressure off. In terms of
Speaker 8: a September rate hike, it would now look.
Speaker 4: A bit strange.
Speaker 8: I think it will look even strange after he had
Speaker 8: some cooler inflation data. Let's see how that plays out.
Speaker 8: We have a big report next week. But this job's
Speaker 8: report in and of itself, I think there's a very
Speaker 8: reasonable case you could make now to wait and see,
Speaker 8: because you are balancing these two mandates, and that is interesting.
Speaker 8: What you know, what we're seeing in some manufacturing construction,
Speaker 8: and we had manufacturing ism that was up at a
Speaker 8: multi year high earlier this week. And you do see
Speaker 8: that it's this AI boom right, which is really affecting
Speaker 8: the economy, and there are some sectors that are really
Speaker 8: benefiting from it. There are other sectors that aren't seeing
Speaker 8: much of the uplift from it. So it's a shifting economy.
Speaker 5: Why let me lose this bok.
Speaker 6: So let me tell you across America right now, we're
Speaker 6: so honored in short notice, Andrew helen Hurst with iss
Speaker 6: of City Group leading all of their US economic coverage.
Speaker 6: Stephanie Roth, I believe is on deck here in a moment.
Speaker 6: We are commercials free to the top of the hour.
Speaker 6: We think so many people, including interactive brokers Conor Resnic
Speaker 6: and others that support us, that we will continue forward
Speaker 6: here commercial free. We do it with futures doubled up
Speaker 6: forty one. The NaSTA continues to put on a here
Speaker 6: on futures up one point two percent this morning, two
Speaker 6: years subsides down just a little bit four point one
Speaker 6: seven percent in a solid seven basis points. Andrew, if
Speaker 6: there's two Americas and there's a job summary that's inappropriate,
Speaker 6: what can the politicians do short term besides job own
Speaker 6: the chairman of the FED.
Speaker 8: Yeah, I don't know if this is something that can
Speaker 8: be addressed in the short term politically, right we can
Speaker 8: talk longer term and I think actually most of the
Speaker 8: longer term solutions for the economy, the deficit, the debt,
Speaker 8: a lot of those are probably bipartisan and that's something
Speaker 8: that's hard to see a lot of in our current
Speaker 8: political system. Dynamic, but in terms of this data that's
Speaker 8: coming in now, these are just powerful external forces right
Speaker 8: where you have a new technology of really strong demand
Speaker 8: associated with it around AI, We've got oil prices that
Speaker 8: are fluctuating. This is the reality is that a lot
Speaker 8: of the shocks and the trends that affect the economy
Speaker 8: are things that aren't under the control of politicians.
Speaker 4: It's very difficult for them.
Speaker 7: Andrew, I mean, the dollar is selling off on this
Speaker 7: newss and you but I mean it's the end too.
Speaker 7: I mean, I think if you look at G ten here,
Speaker 7: it's nochi and then the yen, they're both up, you know,
Speaker 7: six point six point seven percent here, you know, on
Speaker 7: the session, talk to us a little bit about the
Speaker 7: reaction here in the dollar. I mean, do we see
Speaker 7: you know, scope for dollar weakness to continue here.
Speaker 8: Yeah, so I mean we were talking about taking the
Speaker 8: pressure off the FED to hike rates. I'm also taking
Speaker 8: a little bit of pressure off of Japanese monetary policy
Speaker 8: makers and looking at that currency this morning.
Speaker 4: Yeah, it is.
Speaker 8: It is an interesting situation right in terms of how
Speaker 8: are the monetary policy makers going to respond, both in
Speaker 8: the US as well as globally. We obviously have that
Speaker 8: intervention in the currency last week. Everybody is still watching
Speaker 8: that that you know that you have you have two
Speaker 8: things that are going on right when you think about
Speaker 8: the strength of the dollar. One is what's the relative
Speaker 8: strength of the US economy quite strong, right, really benefiting
Speaker 8: from the AI tailwind. And then where are relative interest
Speaker 8: rates in the US economy?
Speaker 5: Well, that is where we've had.
Speaker 8: The ECB that hype rates, and you've had expectations that
Speaker 8: you know, the BOE could hike, and we have the
Speaker 8: bo J of course that is on some kind of
Speaker 8: a hiking cycle. So you know, those things together have
Speaker 8: kind of kept us more neutral on the dollar, thinking
Speaker 8: that you know, stronger gross stronger dollar. On the other hand,
Speaker 8: lower rates in the US that should be weaker dollar.
Speaker 6: Andrew, you're a trooper Veronica Clerk never would have come on.
Speaker 6: You know, I'm say, City Girl, thank you so much.
Speaker 6: Andrew Hollanorski look for his work as he publishes Friday
Speaker 6: and into Monday. Stephanie Roth joins us Wolf Research here
Speaker 6: as we are commercial free as well.
Speaker 5: What are you going to lead with on a Friday note?
Speaker 9: I think it's that this supports the Fed and staying
Speaker 9: on a hold. How can they possibly be hiking into
Speaker 9: this in an environment where inflation is likely also heading on?
Speaker 6: Let's see the opportunity to them for Chairman Watsh to
Speaker 6: reset after that disastrous press conference.
Speaker 5: This is a real window for him to reset.
Speaker 9: Yeah, it is, And I mean we saw to some
Speaker 9: extent that the ft article is maybe some pints that
Speaker 9: you know, he'll reset to some extend in the communication front.
Speaker 9: I think we'll have to see what happens next week
Speaker 9: with CPI. Our expectation is it will come in on
Speaker 9: the softer side, which will then just continue to feed
Speaker 9: into this narrative, which, by the way, often happens in
Speaker 9: the summer because seasonals tend to move in that direction
Speaker 9: that the economy, the lad mark is a little bit
Speaker 9: softer than it previously appeared.
Speaker 7: Well, Stephanie, the market clearly agrees with you. I mean,
Speaker 7: just a few minutes ago we were talking about whites
Speaker 7: and reds. Whites were openly up, but a tick or two.
Speaker 7: Now September, the U twenty six so for contract up
Speaker 7: five to five and a half ticks, So they are pricing,
Speaker 7: really price starting to price it out right now. I
Speaker 7: mean the reds are up eight to nine ticks. I
Speaker 7: mean the front end of the curve is rallying and
Speaker 7: rallying hard. Does that make sense to you? I mean,
Speaker 7: should we be feeling this more on the front end?
Speaker 7: I mean, what do you think about you know, the
Speaker 7: sheep the yield curve?
Speaker 5: Yeah, I think we should.
Speaker 9: I mean the immediate reaction is that they're less likely
Speaker 9: to be going in September. Does that mean the inflation
Speaker 9: problem is solved? We're gonna have to see to some extent.
Speaker 1: It's going to take some time.
Speaker 9: Our expectation, though, is that we have a combination of tariffs,
Speaker 9: the Iran war and AI which has been boosting inflation
Speaker 9: by about one hundred basis points as those move through
Speaker 9: the data, and you have seasonals that will support slower
Speaker 9: inflation from here Neil dudda with.
Speaker 6: Us at seven am, and he's been very cautious on
Speaker 6: the labor front. Quote, the economy is that nearly as
Speaker 6: strong as everyone seems to think. The jobs data are
Speaker 6: not as important as inflation, so that it's not exactly good.
Speaker 5: Bond market is misreading the Fed.
Speaker 6: Is the bond market out front here on gloom given
Speaker 6: that the inflation reports are still to come.
Speaker 9: Yeah, I mean, I think that the bond market was
Speaker 9: certainly a lot more hawkish than investors. When we surveyed
Speaker 9: our own clients of equity investors, for the most part,
Speaker 9: they were expecting the FED to stay on hold. So
Speaker 9: it's interesting that just the divergent that you saw in
Speaker 9: terms of how bomb markets are pricing versus expectations from
Speaker 9: equity investors, and in this environment, it might prove to
Speaker 9: be the case that the Fed is just able to
Speaker 9: stay on hold from here. And now we've learned that
Speaker 9: ortion Trump are in much more communication than many people
Speaker 9: previously thought, which kind of shows his cards to some
Speaker 9: extent that he is would certainly prefer to do nothing
Speaker 9: in September. If the data force him to, he will,
Speaker 9: But this certainly gives an opportunity to stay on hold
Speaker 9: and do it credibly.
Speaker 7: Stephanie, What does this imply for real yields? I mean,
Speaker 7: what do you I mean, we see you know, ten
Speaker 7: yure reel yields kind of yeah, I mean that they
Speaker 7: must come inment off the back of this news.
Speaker 4: Right, absolutely, yeah.
Speaker 7: I mean so then my question really is just how
Speaker 7: much are reields reflecting growth expectations?
Speaker 6: Right?
Speaker 5: I mean so?
Speaker 7: And if they are, I mean, shouldn't we be seeing,
Speaker 7: you know, a rally further out along the curve. I mean,
Speaker 7: it seems like as you get out to the greens
Speaker 7: and the blues, things start to trail off.
Speaker 6: Here.
Speaker 7: I'm just looking again at the front end of the
Speaker 7: US yield curve here, I'm looking at futures contracts which
Speaker 7: you're trading here, and you know, it just seems to
Speaker 7: me that a lot of this move is concentrated in
Speaker 7: the very very ultra front and the whites and the
Speaker 7: reds here.
Speaker 9: Yeah, me, and I think that's the initial that's the
Speaker 9: sort of maejerk reaction. It's okay, well, the immediate response
Speaker 9: is okay, well, the FED is obviously a lot less
Speaker 9: likely to be hiking in September, But does that solve
Speaker 9: a lot of the other problems. There's also the supply
Speaker 9: demand issues at the longer end of the curve, which
Speaker 9: it helps to sort of, you know, keep the longer
Speaker 9: end of the curve a little bit more elevated than
Speaker 9: would otherwise be the case. But we know we might
Speaker 9: be in an environment later in the year where you
Speaker 9: actually see the long end come down a bit more.
Speaker 6: But into the election, and I go back to John
Speaker 6: Edwards standing on the lawn I think it was in
Speaker 6: New Orleans a million years ago, identifying two Americas. I
Speaker 6: get more response from people Stephanie Roth on the split,
Speaker 6: the divide in America, and there's you know, the politics
Speaker 6: and culture wars and all that. Forget about it. I
Speaker 6: got a three month run rate of twenty thousand per month,
Speaker 6: which is totally unacceptable. And I got bidding on properties.
Speaker 6: You're looking out in San Francisco, aren't you.
Speaker 7: You were looking at five million as I'm looking at
Speaker 7: coral gables.
Speaker 5: And how does a.
Speaker 6: FED manage an economy that is so divided between the halves?
Speaker 5: And they have nuts?
Speaker 9: Yeah, I mean that's been the case for a number
Speaker 9: of years now. It's been this K shaped economy which
Speaker 9: is a problem, and I don't think it's fair to
Speaker 9: set to look at the last three month average in perils.
Speaker 9: I don't think it's fair to look at the prior
Speaker 9: three month average.
Speaker 6: I think three months average twenty thousand non farm bay
Speaker 6: rolls is a valid statistic for Kevin Acid.
Speaker 9: No, I don't. I don't think. I don't think it's
Speaker 9: I don't think it's a fair reflection of what's actually
Speaker 9: happening in labor market.
Speaker 5: I think it's more buoyant.
Speaker 9: I think it's more boyant, similar to how we were
Speaker 9: feeling months ago when fair, when it was well over
Speaker 9: one hundred.
Speaker 4: That was almost two hundred thousand fair.
Speaker 5: Okay.
Speaker 4: So I think it's just an.
Speaker 9: Environment where you have to smooth through a lot more
Speaker 9: of this, and there's seems to be more seasonality problems
Speaker 9: in the data than we're aware of, a combination of
Speaker 9: World Cup and some issues within leisure. It's just been
Speaker 9: a you know, an environment where there's been a lot of.
Speaker 4: Sort of quirks in the data.
Speaker 9: When he smoothed through and it tells you lead market
Speaker 9: is fine, it's not overheating, but it probably doesn't suggest
Speaker 9: me there's a you know, urgent need for cuts either
Speaker 8: M HM