00:00:02 Speaker 1: Bloomberg Audio Studios. 00:00:04 Speaker 2: Podcasts. 00:00:05 Speaker 3: Radio. 00:00:06 Speaker 4: News. 00:00:09 Speaker 1: This is a breaking news update from Bloomberg. Instant reaction and analysis from our 3,000 journalists and analysts around the world. 00:00:18 Speaker 5: All right, let's get right to it. Big changes here. Change in non-farm payrolls. We're expecting 90,000 jobs. We're only getting... $ 29, 000. The prior month also revised downward from $ 162, 000 to $. 00:00:33 Speaker 4: 133, 000. 00:00:33 Speaker 5: The unemployment rate rising to 4.2%. The expectation was 4.1%. Average hourly earnings on a month-over-month basis coming in much less than expected, just a tenth of a percent. The expectation was for three-tenths of a percent. You mentioned that two-year yield down eight basis points right now, 4.7%. We check the market's view all day long right here on Bloomberg Radio. I'm John Tucker. 00:01:05 Speaker 3: That's your. 00:01:07 Speaker 5: unemployment report, the jobs report for this Friday. Paul and Tom. 00:01:11 Speaker 4: John Tucker, thanks so much. 4.2% on the unemployment rate. There's a lot of noise in there. I got a C-minus on this. 00:01:17 Speaker 3: Dr. Sam marked me down years ago. 00:01:19 Speaker 2: Yeah, understandable. 00:01:20 Speaker 4: On this 4.2% here. And you know, everything, folks, as I said, it was a real stasis survey. And the answer is the numbers are not $ 29, 000 and the two-month payroll revision is negative $ 60, 000. 00:01:37 Speaker 3: I'm going to nail this. That's a negative $ 29, 000. 00:01:40 Speaker 1: Okay. 00:01:40 Speaker 4: Negative over, you know, a summation here as well. The hourly earnings come in light, light, light, 0.3. And they came in substantially below that, 0.1. Average hourly earnings below. You know, annualized down a tick, 3.1, down to 3.0. Equities lift up 61 on futures, up 30, double up 60. NASDAQ up a full stick, 1%. The VIX, as Paul mentioned. It's 16, comes in at 15. 00:02:16 Speaker 3: Paul, to let Dr. Sam massage the data, what do you see here, Paul, right now? 00:02:19 Speaker 2: I'm just going to the bond market right here, Tom. The two years down nine basis points. It was down two basis points before this report. So we're now at 469 on the two-year. The 10-year, off about 8.5 basis points. The 10-year is now at 5.15%, Tom. So yields coming in, bonds prices higher. 00:02:38 Speaker 4: In Duluth, Minnesota, I think Gordon Lightfoot in Lake Superior. Claudia Somm is with us as she is honored by the University of Minnesota. 00:02:46 Speaker 3: Dr. 00:02:47 Speaker 4: Somm, this is a report that a select group of people said would happen, would come in light, what David Rosenberg called a catch-down. 00:02:55 Speaker 3: What do you do with one month's data? 00:02:58 Speaker 6: Well, I think this does undercut the story that had been coming in today that maybe we have some strengthening in the labor market, right? That maybe the hiring, picking up some. Like this just shows, no, we are, the labor market is much more stable. Like job creation has stabilized relative to last year when it was really sliding, but we are not in an uptrend, right? 00:03:18 Speaker 7: So the August number, it was pop. 00:03:20 Speaker 6: Even with the downward revisions today, it's probably well above what it takes to keep the unemployment rate stable. 00:03:25 Speaker 4: Right. 00:03:25 Speaker 7: But we didn't get another month of that, right? It, like, popped back down. 00:03:29 Speaker 6: So I think we're just in this place of very low job creation in the U.S., which does fit with low growth in the labor force. And the unemployment rate, it did tick up, but basically it's unchanged. I mean, 4-2, 4-1, those aren't big differences. 00:03:42 Speaker 4: I was talking to Veronica Clark about this at Citigroup. And the GDP, and I guess it comes into Claudia. I'm thinking of the late laureate, Ned Phelps, at Columbia, the dynamism. 00:03:55 Speaker 3: Of the American economy. 00:03:58 Speaker 4: Are we getting sclerotic in our non-AI world? 00:04:02 Speaker 6: It is really frustrating to look at the labor market at a moment like this where there really isn't a lot of dynamism. One thing I watch so closely, in addition to the hiring rate, is the quit rate, because. 00:04:13 Speaker 7: That's the opportunity for people to go find better jobs, better pay, deal with higher prices. And that quit rate is also low. We are just not moving people around. So it really is. 00:04:23 Speaker 6: There's so much tension to have a labor market that feels kind of stuck. And an economy where we're talking about transformative technology, like it's like things are out of sync in a way that just doesn't feel like it can keep going. 00:04:36 Speaker 7: And yet it has. 00:04:37 Speaker 6: We are like, you know, at least three years into this low hire, low fire labor market. 00:04:41 Speaker 3: This is not normal. 00:04:42 Speaker 2: How do you think the Fed is going to view this print here this morning? 00:04:46 Speaker 7: I don't think this gives the Fed a lot of information. 00:04:49 Speaker 6: I don't think it'll really change what their approach to monetary policy. Right now, they're trying to contain supply-driven inflation, like keeping a bad situation from getting worse. Fed officials have talked about what's a pretty modest adjustment in interest rates. 00:05:03 Speaker 7: They've done a quarter point. Maybe they do another, maybe two more this year. 00:05:06 Speaker 6: That is not a hiking cycle like 2022 when. 00:05:10 Speaker 7: The labor market's overheating. We have 9% inflation. 00:05:13 Speaker 6: We are not in that world. The labor market is pretty stable. It's not in a great place. It's not the Fed's focus right now. And really, given their mandate and their tools, I think it's appropriate for them to be focused on the inflation side. But again, they've had a pretty modest approach to monetary policy. The markets seem to think something a little more aggressive, and maybe they should tone it back a little today. But I don't think it really shifts the Fed's thinking that much. 00:05:39 Speaker 2: So with a little bit of hindsight here— What is the changed, reduced, more limited immigration policy? How is that impacting? Do we have any real hard data how that's impacting the labor market? 00:05:51 Speaker 6: There have been, I think, first some measurement challenges, right, just in both the surveys and also with employers and reporting. And we've not just a reduction in immigration. We've had temporary visa status revoked, and that revoked some of the work status. And then how do employers handle that, and when does it get reported? So we have, with a pretty big time lag, got a sense of what's actually happening in terms of our immigrant workforce. 00:06:17 Speaker 7: So we don't have a good handle of it. 00:06:18 Speaker 6: I think you can go to a few immigrant-intensive industries, like maybe in construction, and you see some wage growth pick up, which could be labor shortages. But, oh, yeah, we're also building a bunch of data centers. So, like, that's pushing up construction. So it's really hard to pull it out. But it is clear the labor force growth is slowing, not just immigration, but that is a piece of, like, the sharp change. 00:06:39 Speaker 4: Claudia Somm, Safe Travels, thank you so much for joining us today. It's a yeoman's duty here from the University of Minnesota at Duluth. We are ever stronger here with features up 69%. The VIX 15.60, the 10-year yield in a solid seven basis points, 30-year bond even comes in as well. I guess a sigh of relief on worries of an overheating economy. 00:07:04 Speaker 3: She is an expert at this. 00:07:05 Speaker 4: Rebecca Patterson joins us now, the Council on Foreign Relations. 00:07:10 Speaker 3: Let me go right to your work. 00:07:11 Speaker 4: I was at the Greenspan Memorial, just a fabulous effort by Jane Harmon and, of course, Andrea here with all of the people showing up in honor. of Alan Greenspan, some really frank talk about the arc of his work. And I was greeted by Sebastian Malaby, who's booked The Man Who Knew the Life and Times of Alan Greenspan. You have the privilege of doing a podcast with Sebastian at CFR. 00:07:35 Speaker 3: And your recent newly minted. 00:07:37 Speaker 4: Podcast is on central banks. What kind of bind are they in, given the drama I just saw on the Bloomberg screen? 00:07:45 Speaker 8: I mean, let's put the payroll data aside for a second, because the Fed and other central banks are looking not just at one number, but at a dashboard of numbers when they're making their assessment on labor and inflation. I think the challenge for the Fed, the challenge for all these developed markets, and even a few emerging central banks today, is that a lot of... the pressure coming in are supply shocks. And central bank policy changes can't create a barrel of oil. They can't create more chips, et cetera. So it's hard for them to know how to respond to that. Now, some of this is demand-driven, as we know. And the way I'm starting to think about the economy today and AI in particular is it's too much of a good thing. We have Too much capex, literally, going in the economy. Brookings put out a paper recently suggesting 3.6% of GDP for about a decade. I mean, that's an incredible, incredible statistic. 00:08:39 Speaker 3: That's real GDP, folks. 00:08:41 Speaker 1: Yes. 00:08:41 Speaker 3: Okay, folks, let me translate. Paul, banana republic. Continue. Not the clothing store. 00:08:47 Speaker 8: So you've got this boost to growth, but as we just saw, it's not necessarily translating into an equal number of jobs. We have this need for energy that's pushing up inflation at the margin. And as Claudia Psalm just mentioned, love to see her before me, although it's a lot of pressure on me. It sucks away from everything else. And when I say sucks away, I mean you don't have enough construction workers because they're all building data centers. You have pressure higher on treasury yields because you are now competing with all that AI debt. 00:09:21 Speaker 4: Paul, let me give you this statistic here. I think it's really important. I have a huge affection for Duluth. It actually has to do with Rome, Italy. The poverty rate in Minnesota is 9%. Booming Minneapolis, data centers, the Mayo Clinic, the Minnesota Wild, everything. 00:09:37 Speaker 3: I won't mention the Twins. Brian, I'm sorry. I won't mention the Vikings. Okay. In Duluth, the poverty rate is almost double, 16.8%. 00:09:45 Speaker 4: That's the part of America flat on their back. 00:09:49 Speaker 3: Absolutely. 00:09:50 Speaker 2: So, Rebecca, what a lot of people are trying to understand, there's a lot of people in this market that have never seen yields at these levels. It's been a long time since we've seen yields at these levels. Is it fair to tell them this is kind of the new normal? This is actually normal when you look at it historically. And you better get used to these levels? Is that how you're thinking about the yields? 00:10:07 Speaker 4: Yes. 00:10:08 Speaker 8: I think we are in a higher for longer regime. I think government bond yields, again, across a number of markets are resetting higher structurally. 00:10:16 Speaker 1: It doesn't mean they won't go up and down with the economic cycle. 00:10:18 Speaker 8: But the era that we had for 20 some years after the financial crisis in 08, where we had zero interest rates and very low yields, that's not coming back. 00:10:29 Speaker 4: Rebecca, you know that when we make a correction here, we have to do it immediately because the markets are riveted to what we say here in equities, bonds, currencies, commodities. 00:10:39 Speaker 3: Surveillance correction. Brian Belsky, thank you so much for emailing in. 00:10:43 Speaker 4: The Vikings are 3-0, and they got a gimme this weekend with the lousy Miami Dolphins. They're going to be on the edge of Duke, 4-0 in that. 00:10:53 Speaker 3: Let us continue our conversation on the American economy. 00:10:56 Speaker 2: So should we go in and lock in some yield here in the Treasury bond market? I mean, these are coupons we haven't seen before. What do you think here? Do I— buy the coupon here? Do I try to take some credit risk beyond that? 00:11:09 Speaker 3: What would you be doing at Bessemer Trust today? 00:11:11 Speaker 8: If I were still chief investment officer managing your money, I would not be adding to treasuries here. Now, if you're a very long-term investor and you're going to buy it and hold it till maturity, fine. But I still think yields have more upside from here. I would be looking at other ways to have diversification in my portfolio. The problem right now, both of you know this, is if you're looking for countries that have better fiscal situations, we're talking countries like Singapore and Norway. 00:11:38 Speaker 1: And because they have. 00:11:40 Speaker 8: Good fiscal situations, they don't issue a lot of debt, so their debt markets are not very deep. So where you want to own the bonds, there aren't enough bonds to own. 00:11:47 Speaker 4: So what do you do, as I mentioned to Chris Waller at CFR? A year ago, I can't remember. He was running for office at the time. It's almost a double our starred America. 00:11:58 Speaker 1: Oh, I love that. 00:11:59 Speaker 3: He liked it, too. 00:12:00 Speaker 1: I love that. 00:12:01 Speaker 4: You know, and Waller's game theory is like to die for Washington state. But it's a double R, use it with Sebastian, it's a double R-starred America. What does the Federal Reserve Bank president in Cleveland, what does she do worried about runaway inflation and higher rates? 00:12:18 Speaker 3: What does Beth do? 00:12:20 Speaker 8: Yeah, you have to set policy for the whole country. So you might have big disparities between Minneapolis and Duluth. But you have to set policy for the headline, not for certain pockets. That was part of the trouble the Fed got into in recent years when they started focusing on full employment, remember? And instead of just having a neutral employment rate. 00:12:42 Speaker 1: And they wanted to. 00:12:44 Speaker 8: There was a diversity element that came into it, and it was seen as the Fed getting out of their lane. I think right now, inflation, even though we had a benign report earlier and a few days ago on core PCE, I think inflation's sticky. 00:12:57 Speaker 1: It's still above— Core service. 00:12:59 Speaker 3: I don't have the number in front of me. Core service was outrageous. 00:13:03 Speaker 8: I think you still need to be raising rates right now. The economy is strong. Even taking this payroll number out, it's strong. 00:13:11 Speaker 4: Get one more question in here because she is wearing Viking purple today. 00:13:15 Speaker 2: Exactly. Yields are higher, but stocks are still powering through. Is this simply an earnings story driving this market? Well, look. 00:13:22 Speaker 8: At the margin, slightly lower yield. The market's relieved about that. But I think what's going on here, you say, well, yields are up. Why aren't stocks down? Because part of what's driving this is the it's too good to be true. 00:13:34 Speaker 1: It's the AI capex. It's the wealth effect. 00:13:37 Speaker 8: So for now, earnings are providing a nice offset, and that's keeping stocks supported. The question is, where is the tipping point? Where are yields so high that that discount rate, that borrowing rate overwhelms the earnings story? 00:13:52 Speaker 1: We don't know where that is. 00:13:53 Speaker 4: And I beg, with Sebastian Malaby's visceral understanding of the continent of Europe, as a kid, his father was ambassador to Germany in a very challenging time. I'm begging you guys to do a podcast on France, on the continent, and on the bizarreness of the United Kingdom. 00:14:13 Speaker 1: That sounds fun to me. 00:14:15 Speaker 8: We did one earlier this week with Adam Posen from Peterson, who's wonderful. And we played a game of would you rather. Would you rather be a central banker in the UK or France today? And we made Adam pick. 00:14:27 Speaker 3: We do that with John Tucker. 00:14:30 Speaker 4: We go, John Tucker, would you rather be Alexis Christophorus or Michael Barr? 00:14:35 Speaker 5: Yeah, that's a tough choice. 00:14:37 Speaker 3: Rebecca, thank you so much. 00:14:38 Speaker 1: Thank you. 00:14:39 Speaker 3: Huge V.I. 00:14:39 Speaker 4: On Rebecca Patterson with the Council on Foreign Relations. I work at Bridgewater and Bessemer over the years. 00:14:46 Speaker 3: What a joy this is. Our team is just really the cadence of Jobs Day folks. 00:14:51 Speaker 4: It's such a privilege here at Bloomberg to go from Priya Misra early on, Veronica Clark, as well. Christina Kempman, you know, with Invesco. 00:15:01 Speaker 2: Christina hops into the seat, immediately goes into her, logs into the Bloomberg. 00:15:05 Speaker 3: Well, she does. 00:15:06 Speaker 2: She's talking to clients. 00:15:07 Speaker 7: I see everything. 00:15:07 Speaker 2: There's too many things moving. 00:15:09 Speaker 4: Should I, should I, everybody today, you can't see this on radio. The girls are all decked out in scarves. 00:15:14 Speaker 3: Yes. Like, you know, should I have. 00:15:17 Speaker 4: A silk scarf? 00:15:17 Speaker 2: Get dressed up for radio. 00:15:18 Speaker 3: You know, like the, I think you could. 00:15:20 Speaker 1: If you're bow-tied, you're ready to go. 00:15:22 Speaker 3: John, I'd look like I was on Hollywood Squares. It'd be great. 00:15:26 Speaker 5: Yeah, right in the center, the old Paul Lynn Square. 00:15:29 Speaker 4: Is the bond market caught asunder by this jobs report? Was there a bet out there that needs to be covered? 00:15:38 Speaker 1: I don't think so, actually. 00:15:39 Speaker 9: I think the markets and for the Fed, it is still primarily about inflation. I think the labor market has been rather resilient all year. And then I guess two months ago, we had that first big negative print. But it just kind of brought us like level set us back down to kind of this. maybe actually the run rate of breakeven payrolls is the 25 to 50 that we started the year talking about and not this massive acceleration. So I think we're still in this low hire, low fire environment that Claudia spoke about. And I think the bigger question here is this continued inflation. And I think for the bond market, it's about global yields everywhere being higher. And how much is that actually? I think over the year, we've talked about this individual Japan story and this US story. And How much is it the tide that rises all ships? And there's a lot of Europe, obviously, you spoke about today. There's pain there. There's pain in positioning because people have. 00:16:35 Speaker 1: Had a tough year. 00:16:36 Speaker 8: Yeah. 00:16:37 Speaker 2: And part of that has been so much new issuance into the fixed income market. We had the hyperscalers. 00:16:41 Speaker 1: Absolutely. 00:16:42 Speaker 2: This week was a big week. You know, Paramount and SoftBank. 00:16:45 Speaker 4: Yeah. 00:16:46 Speaker 2: How is your market digesting that stuff? 00:16:49 Speaker 9: So, again, I think when we look at global bond markets and treasury markets everywhere and some of this higher yields across the board, part of it is just the glut of supply that's hitting the market and the hyperscaler issuance has been huge. Even at we finally, I know, I feel like we're like the broken record that we're not very constructive on credit, whereas like every credit investor is like all in yield. 00:17:15 Speaker 1: But we're finally seeing a little bit of widening. 00:17:18 Speaker 9: Like we've seen, I think, 50 basis points-ish in high-grade spreads this week. But still, we're starting from such extremely tight levels, even same thing. You look at Italy, Germany has moved a lot in the last couple of weeks, but we're at 125. In the last two years crisis, you were at 250. You can get meaningfully wider in these spreads. 00:17:42 Speaker 4: What is the financial media most getting wrong about price down, yield up. 00:17:47 Speaker 3: In global bonds? 00:17:49 Speaker 9: Um, I don't know that anyone's... that we're, like, getting the story wrong. 00:17:53 Speaker 5: I think. 00:17:54 Speaker 9: there is a much more global nature to it that just how, not that it's coordinated, but like that the pressure points from one to the other are all feeding into each other. And I think if you zoom out and look back at the year, maybe originally we didn't give as much credence to that of how much the initial pressures in Japan was feeding everywhere else. I think for the US, we want to talk about bond vigilantes and inflation pressure and all of this, but All things considered, like post-COVID, you had an inflation period in the U.S. with 9% inflation. Breakevens really never did anything. This has been a real yield move here. And if you actually went to the market really questioning Fed credibility and inflation, bonds can be a lot higher than where they are now. You know, this was like a let's re-rate where is growth. 00:18:45 Speaker 4: U.S. 00:18:45 Speaker 1: Growth has been much stronger, right? 00:18:47 Speaker 4: I'm begging for you to come back next week if you're in town. I would kill to have you back next week. Let's make a note of that. Just too short a time today. Christina Katmany, thank you so much on this job stay as well. Let me summarize here. The dollar was a DXY 102. It's come in a little bit weaker dollar. But it's just amazing to see where levels are. I'd really single out Sterling, a 132.24. It's up right now, but it's had a really difficult morning, to. 00:19:18 Speaker 3: Say the least. 00:19:20 Speaker 4: Oil, under $ 100. Brent, West Texas Intermediate. 00:19:24 Speaker 3: Under $ 90 as well. I still have a bid to the market. We're away from the opening. We'll see how that works out. But futures up 66%. 00:19:33 Speaker 4: Right now, NASDAQ up a large 1.2%. I just can't pull the trigger on triple leverage stock.