WEBVTT - Jobs Data Fuels Bets on Two 2024 Fed Cuts 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business 0:00:10.720 --> 0:00:13.960 Week inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.319 America's most trusted business magazine, plus global business, finance and 0:00:18.400 --> 0:00:22.840 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.800 and Tim Stenebeck from Bloomberg Radio. 0:00:27.880 --> 0:00:29.080 Welcome to Bloomberg Markets. 0:00:29.080 --> 0:00:32.320 I'm Vonni Quinn with Tim Stenebek on this Friday, July fifth, 0:00:32.360 --> 0:00:34.720 post non farm payrolls and of course a lot to 0:00:34.760 --> 0:00:37.480 talk about. It's not just post jobs data today, Tim, Yeah, 0:00:37.479 --> 0:00:38.000 we thought. 0:00:37.800 --> 0:00:39.559 It was going to be kind of a quiet week, right, 0:00:39.680 --> 0:00:42.760 but not really. We have big UK election results. We're 0:00:42.760 --> 0:00:44.879 going to talk about that, Biden holding a campaign at 0:00:44.960 --> 0:00:46.519 rally a little bit later. We'll bring that to you 0:00:46.600 --> 0:00:48.560 live as we do get it. And of course those 0:00:48.600 --> 0:00:50.160 payroll numbers fine. 0:00:49.760 --> 0:00:51.560 Exactly and markets that are on the move. 0:00:51.640 --> 0:00:53.880 And next week we already get into earning season and 0:00:53.960 --> 0:00:56.400 we have fed Ja Powell speaking, so we really are 0:00:56.680 --> 0:00:59.160 ramping up the activity here and it is interesting to 0:00:59.160 --> 0:01:02.040 see stocks on the move with the NOWSDAK one hundred 0:01:02.120 --> 0:01:04.399 now up nine tenths of one percent. But just to 0:01:04.440 --> 0:01:07.120 repeat those numbers in case somehow you might have missed them. 0:01:07.120 --> 0:01:09.759 Today we had June non farm payrolls up two hundred 0:01:09.800 --> 0:01:13.559 and six thousand, but some revisions downward to some previous months, 0:01:13.640 --> 0:01:16.399 the unemployment rate at four point one percent, but not 0:01:16.520 --> 0:01:19.240 triggering the sum rule. Let's get to somebody who knows 0:01:19.280 --> 0:01:21.920 a lot more about the inner workings of the non 0:01:21.920 --> 0:01:25.240 farm payrolls report and how it's impacting bond markets and heels. 0:01:25.319 --> 0:01:28.520 Michael McKee joins us now in studio, and Michael, the 0:01:28.640 --> 0:01:31.800 revisions were very important. Are they typically this important to 0:01:31.840 --> 0:01:32.520 the bond market? 0:01:33.480 --> 0:01:36.280 Not typically, But basically, this is one of the largest 0:01:36.680 --> 0:01:39.400 sets of revisions. Say go back and revise the prior 0:01:39.440 --> 0:01:42.280 two months that we have seen in one hundred and 0:01:42.319 --> 0:01:46.360 eleven thousand jobs taken away is quite a bit. So 0:01:46.560 --> 0:01:48.960 basically it sort of evens out the number we got 0:01:48.960 --> 0:01:52.320 today to the last two months and suggests that the 0:01:52.560 --> 0:01:56.480 economy and the labor market are still relatively strong, but 0:01:56.560 --> 0:01:58.840 not as strong as the Fed might have thought. 0:01:59.680 --> 0:02:02.840 I'm guessing My question, though, Mike, is is really about 0:02:03.800 --> 0:02:06.400 how when things go from bad news being good news 0:02:06.440 --> 0:02:09.239 to bad news actually being bad news. Because the labor 0:02:09.240 --> 0:02:11.440 market weekning is good news for the Fed. I mean, 0:02:11.440 --> 0:02:13.560 this was a Fed friendly report. Look at the bond market, 0:02:13.560 --> 0:02:16.280 no question. But at what point does they do they 0:02:16.280 --> 0:02:19.239 start to see too much softness in the jobs market. 0:02:19.600 --> 0:02:22.360 That's a good question. They predicted four point one percent, 0:02:22.400 --> 0:02:24.440 which is what we have by the end of the year. 0:02:24.880 --> 0:02:27.160 Now does it stay at four point one percent or 0:02:27.200 --> 0:02:29.160 does it continue to worsen? That's going to be the 0:02:29.160 --> 0:02:31.840 big question. Does the Psalm rule come into play? Does 0:02:31.880 --> 0:02:36.720 the Psalm rule even apply in the current macroeconomic situation? 0:02:36.760 --> 0:02:40.400 Should later col her. 0:02:40.560 --> 0:02:41.680 See if she'll. 0:02:43.320 --> 0:02:48.040 Because the other half of this is that wages are 0:02:48.120 --> 0:02:50.760 still rising three point nine percent year over your basis, 0:02:50.919 --> 0:02:53.120 even if you're looking at the CPI instead of the 0:02:53.120 --> 0:02:57.280 fedce PCE. Workers are still getting ahead in terms of 0:02:57.320 --> 0:03:02.080 pay over inflation. So the good news and there's bad news. 0:03:02.320 --> 0:03:04.520 So they are still getting ahead, Michael, But at least 0:03:04.520 --> 0:03:07.120 that didn't take up, right, three point nine percent you 0:03:07.120 --> 0:03:09.520 know year over year, point three percent month over month 0:03:10.120 --> 0:03:12.600 is not enough to calm the Fed that you know, 0:03:13.040 --> 0:03:13.880 inflation won't. 0:03:13.720 --> 0:03:15.280 Be taking up at least thanks to wages. 0:03:15.480 --> 0:03:16.720 Well, we're not there yet. 0:03:17.200 --> 0:03:20.359 The Fed looks at maybe three and a half percent, 0:03:20.400 --> 0:03:24.600 closer to three as a stable level of wage gains 0:03:25.000 --> 0:03:27.399 that would It's the level you would want to see 0:03:27.400 --> 0:03:29.680 if you had two percent inflation, which is their target. 0:03:30.200 --> 0:03:32.200 So they're still thinking that's a little bit high. But 0:03:32.240 --> 0:03:36.240 the progress in coming down, especially with the labor market cooling, 0:03:36.320 --> 0:03:38.640 and a lot of the labor market cooling we saw 0:03:38.680 --> 0:03:42.040 today was in the services sector, which has bothered the 0:03:42.080 --> 0:03:47.480 FED because that their primary input price is wages. So 0:03:47.640 --> 0:03:49.440 if we're seeing wages come down a little bit and 0:03:49.560 --> 0:03:51.360 fewer jobs, it's going to take some of the wage 0:03:51.360 --> 0:03:52.680 pressure off going forward. 0:03:52.920 --> 0:03:55.680 Okay, the June payrolls report is behind us. Let's move 0:03:55.720 --> 0:03:57.240 to next week when we hear from j. 0:03:57.440 --> 0:03:57.840 Powell. 0:03:58.600 --> 0:04:00.960 He's going to do his semi annual Monitor Policy Report 0:04:01.040 --> 0:04:03.560 to the Senate and the House, and then we get 0:04:04.320 --> 0:04:06.960 June consumer price prices out on Thursday. 0:04:07.240 --> 0:04:09.680 Yeah, it's quite quite a week. It's going to be 0:04:09.760 --> 0:04:13.160 quite a week. I think the CPI is going to 0:04:13.160 --> 0:04:17.200 be more of the focus. J Powell is probably not 0:04:17.400 --> 0:04:19.800 going to give an indication of where the Fed's going 0:04:19.839 --> 0:04:24.800 to go. He will even probably dodge questions about July. 0:04:24.880 --> 0:04:26.400 And nobody thinks they're going to do anything in July, 0:04:26.720 --> 0:04:29.080 and the question about September is how do these inflation 0:04:29.240 --> 0:04:33.920 reports come in between now and the September FED meeting. 0:04:34.120 --> 0:04:37.680 And so that's why the market's going to pay more 0:04:37.680 --> 0:04:41.400 attention to CPI than to Powell. But it'll be interesting 0:04:41.400 --> 0:04:44.400 to hear what he has to say about how the 0:04:44.440 --> 0:04:48.000 FED is thinking about the progress that they have made 0:04:48.040 --> 0:04:48.480 so far. 0:04:48.600 --> 0:04:50.720 You know those commentators who say the Fed should already 0:04:50.760 --> 0:04:53.280 be on the move. I'm thinking Neil Dota, mommadala area 0:04:53.320 --> 0:04:53.760 and so on. 0:04:53.920 --> 0:04:56.440 They are, you know, even think it was more get 0:04:56.520 --> 0:04:58.400 on with it already is I think what he said 0:04:58.640 --> 0:04:59.479 exactly what he said. 0:05:00.120 --> 0:05:02.239 The fear is that they end up behind the curve. 0:05:02.440 --> 0:05:05.000 And those are the people who would be looking at 0:05:05.000 --> 0:05:10.080 the PSALM rule, which, just to just to explain it 0:05:10.120 --> 0:05:12.560 a little bit, it's the three month moving average of 0:05:12.600 --> 0:05:16.760 the unemployment rate minus the lowest three month moving average 0:05:16.839 --> 0:05:20.120 number of the past twelve months. Sounds complicated, Yeah, it's 0:05:20.160 --> 0:05:22.160 not that bad. You could do it on an Excel spreadsheet. 0:05:22.160 --> 0:05:23.600 Hopefully Clauda doesn't give us anyway. 0:05:24.160 --> 0:05:27.520 If you get half a percent rise, then in theory 0:05:27.800 --> 0:05:32.760 from the low in theory, you're in recession. However, you 0:05:32.839 --> 0:05:36.039 have to look at why the unemplated employment rate is rising. 0:05:36.160 --> 0:05:39.520 Normally in a recession, it's because jobs are going away. 0:05:40.320 --> 0:05:43.520 In this case, jobs aren't going away, but more people 0:05:43.520 --> 0:05:46.159 are going into the labor market, and so there's a 0:05:46.200 --> 0:05:50.599 greater supply and we have a higher unemployment rate. And 0:05:50.680 --> 0:05:53.120 not to predict what Claudia is going to say, but 0:05:53.400 --> 0:05:55.760 I think she has noted that this is a question 0:05:55.880 --> 0:06:00.560 about the accuracy of the PAM rule in this particular situation. 0:06:00.920 --> 0:06:03.479 Yeah, she's absolutely saying that, you know, maybe this is 0:06:03.520 --> 0:06:06.160 something that we should be watching closely, but that there 0:06:06.160 --> 0:06:08.440 could also be, of course, exceptions to the rule that 0:06:08.520 --> 0:06:11.279 has proved you know, pretty golden stuff. 0:06:11.520 --> 0:06:13.560 If we hit the sm rule, it doesn't matter whether 0:06:13.600 --> 0:06:17.719 Claudia Sam exactly thinks it's accurate or not. The markets 0:06:17.720 --> 0:06:20.839 are going to freak out anyway, because that's what they do. 0:06:21.040 --> 0:06:24.200 Yes, exactly, particularly the last eighteen months or so. Michael, 0:06:24.279 --> 0:06:27.640 Thank you so much. Michael McKee. There are senior correspondent 0:06:27.680 --> 0:06:31.000 there on all things economy and jobs related. Let's move 0:06:31.040 --> 0:06:33.479 to somebody else now who knows a lot about this area. 0:06:33.560 --> 0:06:35.880 Jane o Ites, a senior policy advisor at Working Nation 0:06:36.200 --> 0:06:39.560 that's a nonprofit media organization focused on employment. She's also, 0:06:39.560 --> 0:06:41.800 by the way, a former US Department of Labor official, 0:06:42.080 --> 0:06:45.120 I believe in the Obama administration. So, Jane, what was 0:06:45.160 --> 0:06:47.520 the takeaway for you today on the state of the 0:06:47.560 --> 0:06:49.400 labor market in the United States right now and how 0:06:49.520 --> 0:06:50.599 much it might be weakening. 0:06:51.680 --> 0:06:53.880 Well, I think, just as Michael said, I was thrilled 0:06:53.880 --> 0:06:56.799 to see more people entering the labor force. That labor 0:06:56.839 --> 0:07:01.040 market participation rate has been just, you know, stubbornly stuck, 0:07:01.400 --> 0:07:03.280 so it's great to see it come up a little bit. 0:07:03.760 --> 0:07:07.479 I was disappointed to see the huge drop again in 0:07:07.760 --> 0:07:10.680 temporary help because you know that temporary area is a 0:07:10.680 --> 0:07:12.440 way that a lot of people get back into the 0:07:12.440 --> 0:07:13.920 workforce or get their first job. 0:07:14.320 --> 0:07:16.840 Why do you think that's happening, Jane, Well, I. 0:07:16.800 --> 0:07:19.560 Think the easy answer Tim would be to say, it's 0:07:19.640 --> 0:07:22.000 all the layoffs in tech. You know, a lot of 0:07:22.040 --> 0:07:25.480 the temporary workforce was specifically in tech. You had places 0:07:25.520 --> 0:07:28.720 that trained people that had an associates or a bachelor's 0:07:28.760 --> 0:07:32.480 degree in a specific thing, you know, like they took 0:07:32.560 --> 0:07:35.400 they did data analytics, or they did some kind of 0:07:35.480 --> 0:07:39.440 data visualization software. And since all the layoffs are happening, 0:07:39.560 --> 0:07:41.760 there's not that need for new talent and in the 0:07:41.800 --> 0:07:44.920 tech space. But I'm watching it because you know it's 0:07:44.960 --> 0:07:48.720 down five hundred thousand plus in the last three years. 0:07:48.760 --> 0:07:50.760 That's a lot of a decline. 0:07:51.120 --> 0:07:51.520 For sure. 0:07:51.560 --> 0:07:55.080 It is Jane, what more could the administration be doing 0:07:55.200 --> 0:07:55.760 right now? 0:07:56.120 --> 0:07:57.960 You know, it comes. 0:07:57.800 --> 0:07:59.440 Out every month and says, look, we've been doing a 0:07:59.440 --> 0:08:03.320 fantastic job. This doesn't happen. It happens proactively, and our 0:08:03.320 --> 0:08:05.320 policies have created all these jobs. 0:08:05.680 --> 0:08:06.840 Is there more that could be done? 0:08:07.760 --> 0:08:09.800 Well? I think the only evidence that we see this 0:08:09.960 --> 0:08:12.960 month that things are starting to work is the uptick 0:08:13.000 --> 0:08:17.280 in construction. You know, construction and manufacturing have been relatively flat, 0:08:17.680 --> 0:08:21.160 so that increased this month. In construction. The twenty eight thousand, 0:08:21.160 --> 0:08:23.520 which is over what the average has been, is a 0:08:23.520 --> 0:08:26.120 good sign that the infrastructure money is really starting to 0:08:26.200 --> 0:08:29.280 kick in at the local levels. So I'll take that 0:08:29.360 --> 0:08:30.880 as a ray of hope and hope that it's a 0:08:30.880 --> 0:08:32.720 trend that really continues, Jane. 0:08:32.720 --> 0:08:35.559 President Biden, weighing in this morning after those numbers came out, 0:08:35.559 --> 0:08:37.880 he said, quote, we have more work to do. Wages 0:08:37.920 --> 0:08:40.640 are growing faster than prices, and more Americans are joining 0:08:40.640 --> 0:08:44.920 the workforce. Too many Americans are still feeling squeezed by 0:08:45.080 --> 0:08:47.800 the cost of living, so that's certainly his concern, and 0:08:47.800 --> 0:08:50.400 obviously it's very political. The first question the debate was 0:08:50.520 --> 0:08:54.760 all about the economy last Thursday night. What more from 0:08:54.760 --> 0:08:57.080 your view? And I know you focus on at working nation, 0:08:57.160 --> 0:08:59.400 you focus on the future of work, but what more 0:08:59.400 --> 0:09:02.720 on your view you you can sort of match worker 0:09:02.920 --> 0:09:04.960 salaries with price increases. 0:09:06.600 --> 0:09:09.200 Hardest thing tim in that space is things like chicken 0:09:09.240 --> 0:09:12.960 and eggs and gas can start to come down, but 0:09:13.080 --> 0:09:17.120 rents are and hassing prices are still stubborn. So people 0:09:17.200 --> 0:09:19.960 are seeing that, especially young workers who are trying to 0:09:20.040 --> 0:09:22.600 buy their first house or move out of their parents' 0:09:22.600 --> 0:09:24.760 home and get their first apartment. So I think it's 0:09:24.800 --> 0:09:26.760 going to take a lot of time, and I do 0:09:26.800 --> 0:09:30.000 think there's got to be continued work in Congress, you know, 0:09:30.080 --> 0:09:33.240 to make sure that there are policies in place to 0:09:33.320 --> 0:09:35.920 make sure that first time home buyers get a good 0:09:36.000 --> 0:09:37.600 chance at getting that first home. 0:09:38.160 --> 0:09:41.959 Jane, the payoff between inflation and wage gains, right, it's 0:09:41.960 --> 0:09:44.760 a finely balanced one for the worker. What is the 0:09:44.800 --> 0:09:48.440 sweet spot where workers are getting enough to cover inflation 0:09:48.600 --> 0:09:51.320 but they're not stoking inflation by getting those rises. 0:09:52.200 --> 0:09:53.880 Yeah, I think the best thing is when we see 0:09:53.880 --> 0:09:56.800 people working more full time people, you know, I think 0:09:56.880 --> 0:09:59.840 one of the great things is a lot of workers. 0:10:00.080 --> 0:10:03.640 That number came down in what we call discouraged workers, 0:10:03.679 --> 0:10:06.480 came down by almost five hundred thousand. I mean, so 0:10:06.600 --> 0:10:11.040 I think people are moving from temporary employment, from part 0:10:11.080 --> 0:10:13.680 time employment into full time jobs. That's great because it 0:10:13.720 --> 0:10:16.440 takes the pressure off on things like healthcare. You know, 0:10:16.480 --> 0:10:20.080 people get benefits, people have paid leave, they can have 0:10:20.200 --> 0:10:22.160 sick days if their kid gets sick or if they 0:10:22.160 --> 0:10:24.320 get sick. So I think that's something that's going to 0:10:24.360 --> 0:10:26.719 remove some of the pressure. I think the other thing 0:10:26.840 --> 0:10:31.360 is more, you know, more stores have to join the band. 0:10:31.679 --> 0:10:34.600 The band that's joining saying, like the Walmart and targets 0:10:34.600 --> 0:10:36.160 of the world, saying they're going to make an effort 0:10:36.200 --> 0:10:39.560 to lower prices. I think the price increases that we 0:10:39.600 --> 0:10:43.960 saw during COVID in goods are still stubbornly high, and 0:10:44.280 --> 0:10:47.160 I wonder if there's not ways to bring those prices down. 0:10:48.120 --> 0:10:50.559 Gina, I know that one area of concern for you 0:10:51.080 --> 0:10:53.840 is the idea that you the youngest people who are 0:10:53.840 --> 0:10:57.160 eligible to work aren't necessarily working right now, and when 0:10:57.200 --> 0:11:00.560 you think about those jobs that that teenagers get sixteen 0:11:00.559 --> 0:11:03.240 to nineteen years old, talk about why that's a focus 0:11:03.240 --> 0:11:03.480 for you. 0:11:03.520 --> 0:11:05.640 We don't hear a lot about that, Kim. 0:11:05.760 --> 0:11:08.840 You know me too well, right, that's the bottom line, Fannie. 0:11:09.280 --> 0:11:12.160 This has been a drum beat that I've had for years, 0:11:12.720 --> 0:11:16.040 even when I was in the administration and working nation 0:11:16.240 --> 0:11:18.920 does a lot trying to cover these young people as well. 0:11:19.280 --> 0:11:22.400 If you don't learn those employability skills, think of your 0:11:22.440 --> 0:11:24.319 first job. You know, you learned how to get there 0:11:24.360 --> 0:11:26.600 on time, You learned how to do your job, You 0:11:26.720 --> 0:11:28.839 learn how to work with others, work in a team. 0:11:29.120 --> 0:11:32.320 If you don't get those skills, where schools just can't 0:11:32.320 --> 0:11:34.920 do it. It's unfair for us to look at high schools, 0:11:34.960 --> 0:11:38.760 community colleges, four year institutions, they and say they should 0:11:38.800 --> 0:11:40.920 be doing all these things. They can treat, they can 0:11:40.960 --> 0:11:43.880 train us, they can teach us to think, you know, 0:11:43.960 --> 0:11:47.760 to problem solve, but they can't teach us the things 0:11:47.800 --> 0:11:50.199 we learn uniquely on the job. So you are right 0:11:50.320 --> 0:11:54.080 in double the high, double digit unemployment in that sixteen 0:11:54.080 --> 0:11:57.600 to nineteen year old age group is going to pay 0:11:58.280 --> 0:12:00.560 deficits to us in the future, we're going to see 0:12:00.559 --> 0:12:03.720 those people struggle to really get a foothold in the workforce. 0:12:04.240 --> 0:12:08.080 Where are we as well on minority hiring. You know, 0:12:08.360 --> 0:12:12.079 there had been some you know, progress made on that, 0:12:12.240 --> 0:12:14.560 but it feels like it's potentially stolled. 0:12:14.800 --> 0:12:16.720 What can happen in that regard. 0:12:17.600 --> 0:12:20.320 Look, I think that there's still some progress. I mean, 0:12:20.360 --> 0:12:23.280 if you looked at the labor market, participation rates, you know, 0:12:23.400 --> 0:12:28.360 Latinos and blacks are really increasing every month. But the 0:12:28.360 --> 0:12:31.880 bottom line is the unemployment rate is still stubbornly higher 0:12:31.920 --> 0:12:34.720 among people of color than it is of whites. I'm 0:12:34.760 --> 0:12:37.680 not quite sure what that is. I certainly feel that 0:12:38.200 --> 0:12:42.640 as construction adds jobs, construction, you know, both in commercial 0:12:42.679 --> 0:12:46.400 construction and home construction, have always been open to hiring 0:12:46.440 --> 0:12:50.480 people of color, even hiring oftentimes people who may have 0:12:50.559 --> 0:12:53.320 a criminal record. So I mean, I think that's all 0:12:53.400 --> 0:12:56.640 positive news. I think the negative news is until we 0:12:56.720 --> 0:12:59.880 see the other sector that's really been great on higher 0:13:00.400 --> 0:13:04.400 people across the board of color, men and women, manufacturing. 0:13:04.679 --> 0:13:07.040 Until we see some real job growth there, I don't 0:13:07.040 --> 0:13:10.120 think we're going to make any real improvement in those numbers. 0:13:10.240 --> 0:13:10.440 Jane. 0:13:10.480 --> 0:13:13.240 We only have about forty seconds left, But very briefly, 0:13:13.280 --> 0:13:16.080 we're waiting for President Biden to make remarks at a 0:13:16.280 --> 0:13:19.800 rally in Wisconsin right now. What do you want to 0:13:19.800 --> 0:13:21.680 hear from him on the jobs front? What does he 0:13:21.760 --> 0:13:23.760 need to say to convince voters to go vote for 0:13:23.840 --> 0:13:24.760 him come November. 0:13:25.440 --> 0:13:27.400 So I think he's going to say he has to 0:13:27.440 --> 0:13:30.120 say that he's going to concentrate on this and he 0:13:30.240 --> 0:13:32.640 has to motivate people to come back to work and 0:13:32.720 --> 0:13:35.480 motivate employers to continue the hiring trend. 0:13:36.160 --> 0:13:38.319 All right, Jane Oaates, thank you so much for joining 0:13:38.400 --> 0:13:41.480 us on this Friday afternoon. This Job's Friday here in 0:13:41.679 --> 0:13:44.240 New York. Jane joining us from Arlington, Virginia. That's jaye 0:13:44.240 --> 0:13:47.400 ooas Senior policy advisor at Working Nation. It's a nonprofit 0:13:47.520 --> 0:13:50.960 media organization focused on employment. Also a former US Department 0:13:50.960 --> 0:13:54.439 of Labor official in the Obama administration. 0:13:55.640 --> 0:13:59.160 You're listening to the Bloomberg Business Week podcast. Catch us 0:13:59.200 --> 0:14:02.439 live weekday afternoons from two to five pm Easter Listen 0:14:02.480 --> 0:14:04.640 on Apple car Play and then Bright Auto with a 0:14:04.679 --> 0:14:10.520 Bloomberg Business act or want us live on YouTube. 0:14:10.120 --> 0:14:13.520 Bondi'll certainly down across the curve as we look at 0:14:13.559 --> 0:14:16.199 the two year down ten basis points, Vonnie, the thirty 0:14:16.280 --> 0:14:17.600 year down five basis points. 0:14:17.679 --> 0:14:19.520 Yeah, it was a huge day for years. 0:14:19.560 --> 0:14:22.480 The whole curve shifted and again, as you say, the 0:14:22.600 --> 0:14:24.600 two tenths part of the curve, perhaps more so than 0:14:24.640 --> 0:14:25.000 the long end. 0:14:25.080 --> 0:14:27.400 Let's bring in somebody that would tell us a lot more. 0:14:27.560 --> 0:14:29.840 About that, and that is in studio, Michael McKenzie of 0:14:29.840 --> 0:14:32.720 Bloomberg News and of course with us remotely is Bloomberg 0:14:32.720 --> 0:14:35.720 Intelligence rate strategist to Ira Jersey, Michael, let me come 0:14:35.720 --> 0:14:38.080 to you first. How big of a move is this 0:14:38.240 --> 0:14:42.400 in yields? Considering we've seen several round trips for yields 0:14:42.440 --> 0:14:42.840 this year. 0:14:43.400 --> 0:14:45.760 I think it's so pretty much a range found market. 0:14:45.960 --> 0:14:50.960 That said, the softening we are seeing labor, he's sort 0:14:50.960 --> 0:14:54.040 of called the market now more comfortable pricing pretty much 0:14:54.200 --> 0:14:57.040 close to fret us responsible to rate clups this year. 0:14:57.600 --> 0:14:59.760 September remains live, and. 0:15:01.400 --> 0:15:03.240 You know, Michael, we're gonna have to they're still working 0:15:03.280 --> 0:15:05.120 on getting your mic up. Excuse me, I'm going to 0:15:05.200 --> 0:15:08.000 jump in. Was genius what we're saying. I'm going to 0:15:08.040 --> 0:15:10.200 get you. You'll get to ask the question again, Vonnie, 0:15:10.240 --> 0:15:12.320 But I do want to bring in Ira Jersey, who's 0:15:12.320 --> 0:15:16.040 with us from New Jersey. He's Bloomberg Bloomberg Intelligence senior 0:15:16.120 --> 0:15:19.760 rates strategists. Same question over to you that that Vonnie asked. 0:15:19.800 --> 0:15:21.360 Since we have seen such a round trip when it 0:15:21.400 --> 0:15:23.480 comes to rates, how do you look at today's news 0:15:23.520 --> 0:15:25.080 and the and the drop in rates that we're seeing 0:15:25.120 --> 0:15:26.240 across the curve, Ira. 0:15:26.720 --> 0:15:29.720 Yeah, I think the Fed thinks that the or the 0:15:29.760 --> 0:15:32.320 market things. I should say that the Fed thinks that 0:15:32.360 --> 0:15:34.360 they need an excuse in order to cut interest rates. 0:15:34.360 --> 0:15:37.400 And when you have, you know, a slowing job market, 0:15:37.480 --> 0:15:40.000 then certainly that is one of the key indicators. So 0:15:40.440 --> 0:15:43.080 not a huge surprise that we've had a bit of 0:15:43.120 --> 0:15:46.680 a rally on the somewhat softer data, particularly that little 0:15:46.720 --> 0:15:49.360 tickup in the unemployment rate, although it really was pretty 0:15:49.360 --> 0:15:53.440 incremental overall. You know, the fact that the front end 0:15:53.720 --> 0:15:56.440 is rallying so much is a signal not so much 0:15:56.480 --> 0:15:59.560 that that the Fed is necessarily going to start cutting early, 0:16:00.320 --> 0:16:03.160 that the Federal Reserve might cut more than the market 0:16:03.240 --> 0:16:05.800 was thinking before. So when you look at the you know, 0:16:05.840 --> 0:16:08.120 all throughout the curve and shorter term interest rate, it's 0:16:08.120 --> 0:16:11.080 like like so for futures for example, which are now 0:16:11.160 --> 0:16:14.320 the new short term interust rate instrument to look at 0:16:14.320 --> 0:16:17.360 and not everyone uses to hedge. You look at at 0:16:17.680 --> 0:16:21.000 one year and eighteen months out from today, and those 0:16:21.040 --> 0:16:23.040 of rallied the most, and I think that that's a 0:16:23.080 --> 0:16:26.840 signal that, look, no one really cares in the macro 0:16:27.200 --> 0:16:29.240 if they cut in September or cut in November or 0:16:29.240 --> 0:16:31.480 cut in December. It's a matter of where they get 0:16:31.480 --> 0:16:34.000 to at the end. And we're starting to think that, hey, 0:16:34.040 --> 0:16:36.560 maybe instead of only cutting the three and a half percent, 0:16:36.560 --> 0:16:38.120 maybe they're only going to cut the three percent, And 0:16:38.120 --> 0:16:40.120 that's starting to get price in the market now. 0:16:40.360 --> 0:16:42.800 Well, if that is fascinating, well, Michael McKenzie, let's bring 0:16:42.840 --> 0:16:46.360 you back in here, because it'd be nice if you reacted. 0:16:45.920 --> 0:16:48.720 To what Ira said, and also, you know, explain to 0:16:48.800 --> 0:16:49.000 us a. 0:16:49.000 --> 0:16:53.640 Little bit about why we are seeing the jobs report 0:16:53.720 --> 0:16:55.960 weakening ever so slightly but such a big move in 0:16:56.000 --> 0:16:58.080 the bond market, because you know, it may not be 0:16:58.080 --> 0:16:59.840 a big move to us this year, but in general, 0:17:00.040 --> 0:17:02.120 an eight basis point move is it's a really big move. 0:17:02.280 --> 0:17:03.640 It is a big move, but you have to remember 0:17:03.640 --> 0:17:06.119 we had July fourth, yesterday, a lot of people aren't 0:17:06.160 --> 0:17:08.840 in the market today. I think also, you've got two 0:17:08.840 --> 0:17:11.399 big events to come next week. You've got to pals 0:17:11.880 --> 0:17:15.280 semi annual testimony to Congress and then you'll have the CPI, 0:17:15.359 --> 0:17:17.679 And I think the CPI date is what the market 0:17:17.720 --> 0:17:19.960 is probably weighing. You get confirmation that they could push 0:17:20.000 --> 0:17:22.320 beyond more than just pricing into cuts for this year. 0:17:22.600 --> 0:17:24.720 I think the other interesting thing here is the market 0:17:24.760 --> 0:17:27.879 still isn't pricing in one hundred basis points it cuts 0:17:28.200 --> 0:17:31.160 that the Fed itself expects for next year, and that'll 0:17:31.240 --> 0:17:33.199 be the next leg of this trade. If you do 0:17:33.280 --> 0:17:36.320 get signs that inflation is cooling, the labor market is 0:17:36.359 --> 0:17:38.840 continue to cool down here, then you're going to see 0:17:38.880 --> 0:17:41.359 the markets start to get more comfortable price meeting what 0:17:41.400 --> 0:17:43.920 the Fed is expecting for next year, and that will 0:17:43.960 --> 0:17:45.960 help the front end. And it is very much a 0:17:46.000 --> 0:17:48.400 market that I think is the front end is going 0:17:48.400 --> 0:17:51.359 to lead the charge here. The uncertainty, of course, is 0:17:51.400 --> 0:17:54.679 what's just how much can the back end rally? Given 0:17:54.880 --> 0:17:57.760 the election is going to increasingly come into focus and 0:17:57.760 --> 0:17:59.720 as someone explained to me today, you're going to be 0:17:59.720 --> 0:18:02.080 a remind all the time about the spending is not 0:18:02.160 --> 0:18:04.440 going to slow down. The deficits are going to continue 0:18:04.440 --> 0:18:07.000 to rise, and you're going to see I think a 0:18:07.080 --> 0:18:09.439 restoration of a positive term premium in the back end 0:18:09.440 --> 0:18:09.840 of the curve. 0:18:09.960 --> 0:18:11.480 Hey, Michael, one of the reasons we love talking to 0:18:11.520 --> 0:18:13.760 you is exactly that you do talk to people every 0:18:13.840 --> 0:18:16.240 day in the bond market, people who are buying and selling, 0:18:16.240 --> 0:18:18.280 people who are participating. But on a day like today, 0:18:18.280 --> 0:18:20.320 the day after fourth of July, when you said not 0:18:20.400 --> 0:18:23.080 many people are actually at the office today, who. 0:18:22.960 --> 0:18:24.680 Is who are you talking to? What are they saying? 0:18:25.240 --> 0:18:27.840 Strategists and investors, and they saw people who are monitoring 0:18:27.840 --> 0:18:30.520 the market. But I think in terms of being positioned, 0:18:31.040 --> 0:18:34.280 taking on new positions, putting new positions to work here, 0:18:34.640 --> 0:18:36.400 you're really going to have to see how the inflation 0:18:36.640 --> 0:18:39.200 call compans out from here. So I think next week 0:18:39.280 --> 0:18:41.320 is probably going to be more important. Also be interesting 0:18:41.320 --> 0:18:44.200 to hear what pow pal. Is he more a little 0:18:44.200 --> 0:18:46.200 bit more dubbish or does he kind of stick very 0:18:46.359 --> 0:18:49.480 tight and stay very very focused here and can say, look, 0:18:49.480 --> 0:18:52.080 we want the optionality. We're still looking to do one 0:18:52.119 --> 0:18:54.880 at least one cut this year, and I think that's 0:18:54.920 --> 0:18:56.560 what the market needs to take on board. Too, but 0:18:56.600 --> 0:19:00.919 I'd say today's movement can be exaggerated given the thin liquidity. 0:19:01.720 --> 0:19:04.600 For sure, IRA, What will Fletcher Powell want to convey 0:19:04.640 --> 0:19:05.720