September Jobs Report

Some people treat Chatchy PT like some kind of smart search engine, and some use it to get work done. Chatchy PT work is a new way of working in Chatchy PT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put Chatchy PT to work on your most ambitious ideas and projects. Get started at chatchypt.com by selecting Work Mode, available on plus and pro plans. This is Robert Smith from Business History. If you're listening to this, there's a good chance you're a small business owner. And like every small business owner, you started with a dream to do what you love and watch it grow. What you probably didn't dream about, keeping up with cyber threats. That's where MasterCard can help, with access to tools that help identify cyber threats to better protect your business. Building a dream business, priceless. For cyber security in a changing world, there's MasterCard. Learn more at mastercard.com/smallbusiness. If you listen to financial news, you know a lot of time to spend thinking about what's next. The next opportunity, the next investment, the next move. But sometimes what matters most is being ready for what you never saw coming. For more than 75 years, Cincinnati Insurance has worked with independent agents to help protect businesses, homes, valuables, and more. Because planning for the future isn't only about knowing what's next. It's about making sure you're ready for what you can't predict. Let Cincinnati Insurance make your bad day better. Find an independent agent at CINFIN.com. Bloomberg Audio Studios. Podcasts, radio, news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern, on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Always we start strong. With Claudia Sam, to say she's chief economist at New Century Advisors, barely describes the accolade. She is at the University of Minnesota in Duluth. Whoa. Okay. We're men and men in Plackey in 12 months of the year, giving a speech and being honored, of course, as she should be by all of their economics. Claudia Sam, the two Americas of Duluth and say New York City are a median house price of 250,000 versus something like seven under 10,000 in New York City. The job economies that we're going to see in four minutes. How does the Fed treat Duluth's job economy versus New York City's job economy? Right. Well, the Fed has a difficult position in that they have one tool, the federal funds rate, the interest rate. Right. So they really have to look at the US labor market as a whole. They can't look at Duluth versus New York City differently. And honestly, a lot of the things that we see in local labor markets that distinguish them, they aren't the business cycle. They aren't what the Fed really tries to stabilize. They're much longer-run trends. There's been shifts in demographics, shifts in industry, some of which happened decades ago, like the closing of US steel, which is far in the rear view mirror. Still has real implications in the Duluth local economy. Claudia, is this US labor market? Can it still be characterized as a low-hire, low-fire environment? Absolutely. And we got more confirmation this week on the good side of it, the low-fire. Right. We saw a job initial, jobless claims. Go below 200,000 again last week. And that is very low, close to the lows of this year. The jolt, the job openings, the labor turnover survey, also showed very low layoff rates. That's a good thing. You got a job. You like your job. This is a good labor market. If you are looking for a job, or yes, when I was speaking to a bunch of college students who will soon be looking for jobs, this is tough. Like the hiring rate is still really low. We got a good number last month. In August, with 162,000 payrolls net created, we need to see more of that before I'm convinced that we're really on an uptrend in the labor market. I think we've had a lot of stability, but against stability is not good if you are on the outside looking in. Yep. How can this economy grow on an nominal basis north of 6% if really not creating that many new jobs? Is it better productivity? Well, it's hard to see this being sustainable. Particularly, I mean, we have such low labor force growth right now with the sharp reduction immigration and aging of the workforce, people getting under retirement. It's just we're not growing a lot of workers. And typically, that's a big piece of supporting growth. So right now if labor force is not growing and economy, the activity is growing. It's got to come from productivity, but like, you know, ad adoption is not widespread enough to explain to this. So it's curious. It really is. Claudia, 114% of my audience is certain the real wage is declining. When we look at wage data and take out real inflation, not some fancy Claudius Somme inflation, are our paychecks going up? I don't buy it. Yeah, you know, it is, it's so hard. And I think this is one where for people, you know, looking at the statistics, it's hard often to see themselves in it. Wages are really difficult to measure, you know, how they change over time. There's a lot of composition that the aggregate numbers try to take into effect. And then of course, what you need to buy, I mean, are you someone who needs to drive to work or not, like that can make a big difference in how hard you've been hit this year in terms of higher costs? Right. So it's not a clear slam dunk that real wages are just growing really fast. This is not a labor market where people have a lot of options who move to better jobs either. We triangulate our research as we always do with the noted economist Claudius Somme in filling up at the Wawa, Jen Tucker. How is that driving commute going, Mr. Tucker? I mean, it's been down a little for 35 gallon diesel still, you know, elevated, I think it was about 640, down a little bit still, very much elevated. We thank you for the piercing digital. I should say report there from Jen Tucker. We're going to come back with Dr. Somme, again, an honor from the University of Minnesota at Duluth. We'll continue with Claudius Somme and then on to other good conversations. We welcome all of you, commercial free across America, Paul Sweeney and Tom Keenan. The job say, Paul, a way more blinking on the screen than normally I would see into the report. - Yeah. - The wedding ring blinky is tangible. Features of 40. The Sweeney yield is what I focus on. And right now I've got that at 4.77 percent. 4.77 percent in America. All right, let's get right to it. Big changes here. Changing non-farm payrolls. We're expecting 90,000 jobs. We're only getting 29,000. The prior month also revised downward from 162 to 133,000. The unemployment rate rising to 4.2 percent the expectation was 4.1 percent. 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 percent. Let me check the markets for you all day long. Right here on Bloomberg Radio, I'm John Tucker that's your unemployment report. The jobs report for this Friday, Paul and Tom. - John Tucker, thanks so much. 4.2 percent on the unemployment rate. There's a lot of noise in there. I got a C-minus on this. Dr. Salmock marked me down here. - Yeah, understandable. - On his 4.2 percent here. And you know, everything folks, as they said, it was a real stasis survey. And the answers, the numbers are not. 29,000 and the two month payroll revision is negative 60,000. I'm going to nail this. That's a negative 29,000. - Okay. - 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, you know, annualized. Downed tick, 3.1, down to 3.0. Equities lift up 61 on futures. Up 30, double up 60. Nasdaq up a full stack, 1 percent. The VIX, as Paul mentioned, it's 16, comes in at 15, Paul. To let Dr. Salmissage the data. What do you see here, Paul? - I'm just going to the bond marker 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 eight and a half basis points. The 10 years now with 5.15 percent, Tom. So yields coming in bonds prices higher. - And Duluth, Minnesota. Think Gordon Lightfoot and Lake Superior. Claudius Salmissage, she is honored by the University of Minnesota. Dr. Salm, this is a report that a select group of people said what happened would come in light. What David Rosenberg called a catchdown. What do you do with one month's data? - Well, I think this. 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, 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? So the August number, it was pop even with the Downer Division today. It's probably well above what it takes to keep the unemployment rate stable. Right. But we're not going, we didn't get another month of that, right? Like popped back down. So I think we're just in this place, a very low job creation in the U.S., which does fit with low growth in the labor force, and the unemployment rate did tick up, but basically it's unchanged. I think four, two, four, one. Those are big differences. I was talking to Veronica Clark about this, it's Citigroup, and the GDP, and I guess it comes into Claudia, I'm thinking of the late laureate Ned Phelps at Columbia, the dynamism of the American economy. Are we getting sclerotic in our non-AI world? 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 watched so closely in addition to the high-pring rate is the quit rate, because that's the opportunity for people to go find better jobs, better pay deal with it, you know, higher prices, and that quit rate is all so low. We are just not moving people around, so it really is, there's so much tension to have a labor market that feels kind of stuck, and in economy where we're talking about transformative technology, things are out of sync in a way that just doesn't feel like it can keep going, and yet it has. We are at least three years into this low higher, low fire labor market. This is not normal. How do you think the Fed is going to view this print here this morning? I don't think this gives the Fed a lot of information, I don't think it'll really change what their approach to monetary policy right now, they're dealing, they're trying to contain supply-driven inflation, keeping a bad situation from getting worse, Fed officials have talked about what's a pretty modest adjustment in interest rates, they've done a quarter point, maybe they do another, maybe two more this year, that is not a hiking cycle like 2022 when the labor market's overheating, we have 9% in place, we are not in that world, the labor market is pretty stable, it's not 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 market is going to think that 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. With a little bit of hindsight here, what has the changed, reduced, more limited immigration policy? How is that impacted? More data? How that's impacting the labor market? 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, so we don't have a good panel of it. I think you can go to a few immigrant intensive industries, maybe in construction, 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 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 the sharp change. Claudius, safe travels, thank you so much for joining us today. You know what I'm saying, you know, women's duty here, from the University of Minnesota at Duluth, we are ever stronger here, the future's 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, she's expert at this Rebecca Patterson joins us now, the Council on Foreign Relations, let me go right to your work, 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, and your recent newly minted podcast is on Central Banks. What kind of binder they in, given the drama I just saw on the Bloomberg screen? 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, etc. 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. That's the Neil GDP, folks. Yes. Okay, folks, let me translate. Paul, banana republic. Continue. Not a cooling store. 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 Som 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. Paul, let me give you this statistic here. I think it's really important. Have a huge affection for Duluth that actually has to do with Rome, Italy. Poverty rate in Minnesota is 9%, booming Minneapolis, data centers, the Mayo Clinic, the Minnesota wild, everything. I will mention the twins. Brian, I'm sorry. I won't mention the Vikings. Okay. In Duluth, the poverty rate is almost double 16.8%. That's the part of America flat on their back. Absolutely. So, Rebecca, a lot of people are trying to understand it. There's a lot of people in this market that have never seen yields at these levels. Right. A long time since we've seen yield at these level, 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 think about these yields? Yes. I think we are in a hire for longer regime. I think government bond yields, again, across a number of markets are resetting higher structurally. It doesn't mean they won't go up and down with the economic cycle. 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. 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. Surveillance correction, Brian Belsky, thank you so much for emailing in. The Vikings are 3 and 0, and they got to give me this weekend with a lousy Miami dolphin. Okay. They're going to be on the edge of Duke, 4 and 0 and that. Let's continue our conversation on the American economy. 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? Do you want to do it in the best summer trust today? If I were still chief investment officer managing your money, I would not be adding to treasuries here. Okay. 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, and because they have 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. So, what do you do, as I mentioned, to Chris Wallard, see a far a year ago, I can't remember, he's running for office at the time. It's almost a double R-starred America. Ooh, I love that. He liked it too. I love that. And you know, and Wallard's game theory is like to die for it, Washington State, but it's a double R-starred America. It's a double R-starred America. What does the Federal Reserve Bank President and Cleveland, what does she do, worried about runaway inflation in higher rates? I mean, you have to. 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 that Fed got into in recent years when they started focusing on full employment. Remember, and instead of just having a neutral employment rate, and 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. in a few days ago on Core PCE, I think inflation sticky. It's still above. >> Your service, I don't know the number in front of me. Of course, service was outrageous. >> I think you still need to be raising rates right now. The economy is strong, not even to, you know, even taking this payroll number out. It's strong. >> Get one more question here, because she is wearing Viking purple today. >> Exactly. Yields are higher, but stocks are still powering through. >> Right. >> Is this simply an earning story? >> Driving the market. >> Well, look, at the margin, slightly lower yield, the markets relieved about that. But I think what's going on here, you say, well, yields are up, buy aren't stocks down, because part of what's driving this is the, it's too good to be true. It's the AI CapEx, it's the wealth effect. So for now, earnings are providing a nice offset, and that's keeping stocks supported. The question is, where's the tipping point? Where are yields so high that discount rate, that borrowing rate overwhelms the earning story? And we don't know where that is. >> And I beg, was Sebastian Malibis' visceral understanding of the continent of Europe? >> Yes. >> As a kid, his father was ambassador to Germany when a very challenging time. I begging you guys to do a podcast on France, on the continent. >> Yes. >> And on the bizarreness of the United Kingdom. >> That sounds fun to me. We did one earlier this week with Adam Posen, from Peterson, who's wonderful, and we did, 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? >> We do that with John Tucker. We go, John Tucker, would you rather be Alexis Christophe or Michael Barr? >> Yeah, that's a tough choice, isn't it? >> Rebecca, thank you so much. >> Thank you. >> You should be all right, Rebecca Patterson. I have the Council on Foreign Relations, the work of Bridgewater and Bessimer, over the years. Patterson lifts the market. Features up 64, the VIX-15.52. As Paul mentioned, he yields critical right now. They come in six basis points, which is where we want to go. What a joy this is. Our team is just really the cadence of jobs, Dave folks, is such a privilege here at Bloomberg to go from Priya, Missouri early on. Veronica Clark is well, Christina Kemp, many know, within Vesco. >> Christina Hempbsen to see, immediately goes into our blogs into the Bloomberg. >> Well, she's ready to go. >> I can see everything. There's too many things moving. >> Should I, everybody today, you can't see the sun radio. The girls are all decked out in scarves. Like, you know, they, should I have- >> Guess the stuff is fair, you know, like the, and I think- >> Good. >> If you're row time, you're ready to go. >> John, I looked like I was on Hollywood Squares. It'd be great. >> You're right in the center. The old Paul Lin square. >> Is the bond market caught a sunder by this jobs report? Was there a bet out there that needs to be covered? >> I don't think so, actually. I think the markets are, 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 higher, 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 had a tough year. >> Yeah. And part of that is there's been so much new issuance into the fixing income market. We had the hyperscalers. This week was a big week, you know, Paramount and Soft Bank. And how is your market digesting that stuff? >> Yeah. So again, I think when we look at global bond markets and treasury markets everywhere in 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. And 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. But we're finally seeing a little bit of widening, like we've seen, I think, 50 basis points in high grades in high grades right this week. But still, like, we're starting from such extremely tight levels, even same thing. Like, you look at Italy, Germany has moved a lot in the last couple of weeks, but we're at 125. Like in the, in the last two years crisis, you were at 250. You can get meaningfully wider in these spreads. >> What is the financial media and most getting wrong about price down yield up in global bonds? >> I don't know that anyone that we're like getting the story wrong. I think there is a much more global nature to it that just how core, 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 US with 9% inflation. Break evens really never did anything. This has been a real yield move here. And if you actually went to the market really questioning fed credibility 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? US growth has been much stronger, right? >> I'm begging for you to come back next week if you're in town. I would have you killed, I have you back next week. Let's make a note of that just too short of time. Thank you so much. On this, you have to say 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 say the least. Oil, under $100 brand, West Texas Intermediate, under $90 is 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 right now, NASDAQ up a large 1.2%. I just can't pull the trigger and triple every stall. I don't know, it's two year 472, not two. >> And from a 477. Stay with us more from Bloomberg Surveillance coming up after this. Some people treat Chachy PT like some kind of smart search engine, and some use it to get work done. Chachy PT work is a new way of working in Chachy PT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. Put Chachy PT to work on your most ambitious ideas and projects. Get started at chachypt.com by selecting Work Mode, available on plus and pro plans. Artificial intelligence is transforming how businesses operate, but what will it take to build a truly autonomous AI enterprise? On October 28th in Boston, join the Bloomberg tech briefing, building the agent enterprise to hear business and technology leaders explore the strategies needed to build cyber resiliency and secure trusted AI systems for the agent AI era, proudly sponsored by HPE. Learn more and register at BloombergLive.com/BloombergTechBreathing. You're listening to the Bloomberg Surveillance podcast. Catch us live weekday afternoons from seven to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg business app, or watch us live on YouTube. You know, we don't like if somebody's wrong, I mean trust me folks, I've been wrong a million times, Tucker keeps track of it. But the answer is when you nail the jobs report, like Nicole bushode, over at Zip Recruiter you go, why? What does she see that the other fancy people don't see? Nicole, Zip Recruiter is so granular. How did you get a tepid report, right? And how did you get wage growth a little bit weaker, right? You know, I'm following the economic data at the, you know, BLS level, as well as indicators that we see on Zip Recruiter to really understand the direction that this labor market is moving. You know, overall, this slower job growth is leading to much lower turnover in the market. There's less opportunities for people to move between positions that's putting downward pressure on wages, inflation and general, you know, input cost increases is also adding to business pressures to lower wage growth. And that's why we're seeing that number come in still below inflation, causing a lot of affordability concerns for the majority of the US workforce. So why do you think job growth is sluggish, not great, whatever you want to call it here? We saw this great report in August that has kind of turned into this one off moment in the summer and it's likely that we're going to see much slower job growth like the September report for the rest of the year. In the last month, we saw Treasury yields hitting a 20 year high and the Fed increased interest rates, both of those things make borrowing money more expensive. So employers looking to expand their workforce, expand their operations are now facing higher costs. That's added on top of the stubborn inflation that we've been seeing for many months, particularly when it comes to gas and grocery prices, changing consumer demand, changing those impact costs for employers again. All of that leads to more pressure on employers to kind of pull back rather than to expand and to move forward with hiring. That leads to slower job growth, those lower wage gains, and again, that affordability pressure that's really put onto those workers who are seeing this come from both sides both in the labor force and as consumers who are paying the final price for these products. I'm not sure whose number we should be using here, but it's north of 6% anyway, you slice it here. With that kind of growth, I thought we would have seen more consistent job growth, maybe even some wage growth, but it's kind of stagnant out there a little bit. When you look at where investment is going, there's this huge investment push for AI, particularly these big data centers and this build out for the infrastructure to support this new technology. And while we're seeing some local labor markets adding jobs for these data centers, they don't really take that many people to operate the facilities once they're up and running. The overall job boost from AI is quite low from the physical side of the equation and workplaces are still figuring out how to integrate the technology and what to actually do with that. While our surveys at Zipper Cruder show that employers are looking to hire more with AI, the actual implementation of those plans has yet to really fully materialize in the market. This side of why we're not seeing wage growth increase when we have a really high GDP, we've seen GDP growth productivity in general and wages kind of going in different directions for the last 20 years. We're seeing more of the profits and revenues that businesses are making going towards capital investments and shareholders and less of that going into the pockets of the workers who are actually building and doing the work. And Nicole Bush, we continue labor economists at Zipper Cruder, she nailed the jobs report to say the least Drew Madison, that life just publishes labor markets looks soft to keep fed on hold in October, strong enough to keep December in play. That from Drew Madison, we'll get him in here. This time he has to wear a bow tie. Is that right? Okay. I was going to wear a bow tie today, but then you know, whatever. Nicole, I look at this and what I hear date to date today is digital like Zipper Cruder has changed our labor economy. It's a whole core to people out there, mostly younger, who are putting out 400 resumes into a digital blur. Is this any way to run a labor economy? So we're seeing both the job seeker experience, the candidate experience of, you know, it's really easy to put out an application now. But we're also seeing that it's really difficult to actually be heard and to land into an inbox where you're actually going to hear back from an employer directly. They're also facing the struggle where they're integrating more AI and technology to streamline the candidate review process. Is there getting more applications per job opening? And both sides are seeing that, you know, this technology is making some things easier, but it's also creating a lot more noise. And that's really where we see the biggest problem on both sides is we have all this technology, but people are really missing that human connection of getting the candidate in front of the employer, which is really the end goal of the whole process. Like the way it used to be Paul is, did you play lacrosse at, were you on top concerns? Did you play lacrosse at Maryland, I can't remember. No, I learned at Lawrenceville, and that's about as far as I went, we all learned it at the same time. Nicole, so it's all about labor today, but of course the other side of the remit for the Fed is the inflation, and that's really the focus of this Fed reserve. What you call on just inflation here, because again, we saw that the wage growth wasn't that great today. Yeah, you know, inflation is really being driven right now by high energy prices, those high energy prices when the Iran war started were maybe seen as a short term, but it's really looking like a long term pressure on prices that's working its way throughout the market as it becomes more expensive to fill up a tank for a big truck transporting goods across the country. Those goods are going to become more expensive as those energy and gas prices remain elevated, and we're starting to see that across the economy now. So prices are up groceries, especially anything that has to do with transportation, we're releasing a lot of pressure there, and that's why inflation is becoming a lot stickier, a lot more challenging. Housing inflation is also going to be somewhat of an issue still, but because of the affordability concerns, especially with higher mortgage rates, that's coming down a little bit. Paul killed it. Nicole Bush showed labor economy supercredits with a nice tone on this jobs report. Catch us live weekday after news from seven to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg business app or watch us live on YouTube. With RBC, the Royal Bank of Canada, great synthesis on the economy. Francis Donnell joins us now Chief Economist, RBC. Francis, do you have to make a lot of adjustments in Y equals C plus I plus G plus NX? Do you have to make a tweak here into the weekend after this jobs report? Oh, no way. We are our trend watchers, Tom. We're looking at how are things moving over a three month, six month type of move. We are listening to chair wash. It is not about month to month moves, but more importantly, we have been believers. We continue to be believers that this is a very strong job market. And yes, this number is not great. There's no industry that's meaningfully driving job creation. Healthcare, which has really been the main contributor that slowed from about 33,000 a month to 17,000 a month. But an unemployment rate of 4.2 is actually slightly less than 4.2, 4.175 percent is still very strong. And look at the underlying labor market here. The job finding rate is high for the second consecutive month. Separations are low and the break even rate for job creation in the United States by our estimate is around 20,000. So if we're adding 29,000, this is just fine. So I'm looking at a labor market that is actually for me best of both worlds, Tom. It is showing us that the economy is not overheating. We don't need to worry about demand side inflation, which is going to use for the Fed. But it's still fundamentally strong. Does this data report, maybe the trend suggests that the Fed maybe doesn't have to be as aggressive in raising rates here? Well, the Fed should be raising rates in our view to combat inflation. And whether or not they're going to be swayed by one month depends on whether chairwashes reflecting the entire committee when he says it's not about one month to month moves. And it's about five and a half years of above 2% inflation or not. But clearly the markets are saying actually know this is a Fed that is still very focused on the month to month. And this does give them a bit of breathing room, particularly they're going to be looking at hourly wages. That's not my favorite measure. I'd rather look at weekly wages. That's how much money you get home at the end of the week and they're going to say there's no urgency on the job side of the mandate to respond with higher hikes in October. Maybe we can wait till December. What's the contagion factor out there, friends, Francis is your right for Montreal and for all of Canada right now with a global view. How do you measure the contagion and inks that we see in select markets? There's a lot of concern about what the moves in the US bond market mean globally for our European clients. I was on the west coast of Canada this week and this was all we were talking about is is that long end of the curve driving up rates globally. And if it is how is that going to slow the economy and frankly what strikes me is most interesting is that most businesses are not asking is the Fed going to hike at the next meeting and even is the bank of Canada going to hike that's been pulled into the conversation as well. But what does this belly in the long end of the curve mean and some of the conversations we've been having is that for the past 15 years or so. The story has been the bond market is watching the central banks and now that's shifting entirely to the central banks watching the bond market and businesses are having to respond. Not to incremental moves from chair warship governor Maclim or ECB president legard but to how the global markets are pricing in what it should cost to borrow. And that's a tone shift from just the real economy compared to what where we've been, frankly, without hyperbole for the past 15 years. - So, Frances, I'm looking at average hourly earnings on an annual basis 3.1%, I'm pretty sure. Inflation's probably at a above that level here. How's that impacting the consumer out there? - It's a great question. We're thinking a lot about wages because maybe I can lean into the two-sided, two-handed economist trope for a second. On one side, wages matter way less to the broader economy than they have historically. In part because the population's getting a lot older, wages are only 50% of income in America now. 20% of take-home pay, right, is government transfers. 20%, one in five dollars going into the pockets of Americans is government transfers. And a huge chunk of that social security, guess what, it's inflation-adjusted. If you're bringing home social security, you are going to get probably about a three-and-a-half percent raise next year because we already know the colas for next year. And so your segment of the economy that is going to be responsive to wage growth is actually shrinking much smaller. And yet, if you are actually bringing home a wage, and that is your predominant form of income, we know a middle-income consumer's real wage has had been negative since April. It matters. - This is bleed to them. - Frances, don't move, stay with us. This is classic, Frances Donald. - Yep. - Of course, no. - I had no idea. The wage income was that low of a number of our total income. What I know is the markets are open, we need to dash to John Tucker, John. - All right, there you have it. Well, maybe they did too, not the bell at the New York City. - There we go. - There we go. Ding, ding, ding, ding. The big blue opening bell at the New York Stock Exchange. - Yeah, look at that. - How cool is that? - Right out of the gate, the Dow up 341 points of 7/10 of an S&P 500 up 67 points of 9/10 of a percent. The Nasdaq Composite Index of 335 points. That's a rise of 1 and a quarter percent. Some of the individual shares on the move shares of Nike, 7.3% lower Tesla shares. After reporting those sales figures, the delivery figures up 2.4%. The New York Giants. - Bringing the ED-16. - The ED-16. - Yeah, the 40th anniversary. - Yes. - Oh my goodness, I feel old. So who we see there? Phil Sims, Harry Carson. Who's one of the nicest people in the world at Karl Banks of the 1986 Super Bowl? - I'd sit those guys up again. - Yeah, I'd be in a ship. Yeah, I didn't see Odell Beckham Jr. up there. Then we check the markets for you all day long. Right here, I'm Bloomberg Radio. I'm John Tucker. That's your opening bell report, Paul and Tom. - John Tucker, thank you so much. Dow up 330 points. Pretty much equivalent. Maybe not quite the lift we saw in futures. Nasdaq up 1%. Paul Sweeney with Francis Donald of RBC. - Francis, what's your call on inflation these days? We're trying to just watching energy prices whip around on a daily basis. So what's the underlying inflation in your mind? - It's probably mid-toes and maybe even higher. I am concerned about inflation. It's moving in the wrong direction. And it has a lot of breadth. And so you've got about 55% of items in the CPI basket that are growing above 3%. There's goods inflation, which we believe hasn't even seen the full impact of the tariffs. And of course, energy coming through. Services inflation is not going to see much relief either. And then you have this underlying AI inflation that's coming through the system. And we're not entirely convinced that's even interest rate sensitive. So when I think about sticky high inflation, my main concern is I don't see a pathway out of it. I could see a pathway to averaging 2%. And that's creating weakness in one segment of the economy. But this is, I think, a sort of semi-permanent state of this mid-toes drifting towards 3s inflation for at least a year here. - Francis, thank you so much. I really appreciate it. This morning, Francis Donald and with a shell published for RBC. And look for that from RBC Capital. (upbeat music) - Stay with us more from Bloomberg Surveillance coming up after this. - Some people treat Chachy-P-T like some kind of smart search engine. And some use it to get work done. Chachy-P-T work is a new way of working in Chachy-P-T that can take action across your apps and files. Stay with a project for hours if needed and turn a goal into finished work. So all the source materials, briefs and scattered information that you have to grind through to turn into something useful can just become something useful. Put Chachy-P-T to work on your most ambitious ideas and projects. Get started at chachy-P-T.com by selecting work mode, available on plus and pro plans. - Hi, I'm Barry Rittultz inviting you to join me for the Masters in Business Podcast. Every week we bring you conversations with the people who shake markets, investing and business. I speak with CEOs, Nobel laureates, market innovators and legendary investors. Whether you own stock spawns, real estate commodities, even crypto, these are discussions you absolutely need to hear. Subscribe to the Masters in Business Podcast on Apple Spotify or anywhere you listen. (upbeat music) - You're listening to the Bloomberg Surveillance Podcast. Eastern. - Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. - Or watch us live on YouTube. - You get lucky. This is the interview of the day. I'm supposed to talk to Hugh Von Steenas of Apollo about the wonderful giant of UK economics, Charles Goodhart, but we're going to rip up the script. Why are we going to do this? There's a point where you start out. People try out Hugh Von Steenas and they say, well, he did this. He used to skate with Mark Karney. If the Karney being the goal, then he would have to take shots at him and not embarrass him on the blocker side. The important thing is Hugh Von Steenas cut his teeth for 14 years at Morgan Stanley in banking. And whether it's going on in my Bloomberg screen, we're ripping up the script this morning with Hugh Von Steenas. Of course, it's worked public service to the United Kingdom and now to Apollo. Hugh, I look at this moment. It's modded by a sudden drop in euro and finally, Swiss Frank moves to strength. What is the financial condition of the banks in the non-banks that you're expert on in Europe? - Well, having me on, you know, I think it's fascinating. It was a financial conference here in London last week with 90 of the CEOs and CFOs. And actually, the line from them was that European banks are probably in their best health for 30 years. They've got a reasonable yield curve, the credit conditions are benign, there's been a bit of a pick up in loan growth, and actually, they're starting to get investing in technology. And so, oddly enough, they were arguing, this is actually a good environment in the last 30 years and the benefit has been, despite all the shocks and the energy shock clearly today with diesel and gas, is then, the economy has been pretty resilient. So, what we're seeing is an economy which is freeing. There's definitely some stress in the system coming from the energy prices, but actually, the economy and the banks still continue to be in very resilient health. - What does France single to you and not just the simplistic idea of the French German difference in yield, but the sophistication that Apollo looks at in swap markets in private relationships. How fragile is France? - Look, I think the issue here is thinking about the macro conditions and fiscal consolidation. And I think what we've seen across many European countries and also in the States is the pressure to continue to spend on entitlements is very strong. And therefore, with that pressure, the ability to consolidate the fiscal position is really quite difficult. So, investors are posing the natural questions that you would also have, Tom, it's about how high can rates go, how rate-sensitive is the economy, what does that mean for economic growth? But I come back to it, when you talk to the leaders of the companies, when you talk to the financiers, they're trying to problem solve. And so, for every stress and pressure on the system, there's a lot of problem solving going on. And I think in a way, post the pandemic, leaders have realized that they can pull levers. And therefore, I really would think that despite the obvious issues on the tape, the resilience and the ability of managers to pull levers, I think is not to be understated. - Hugh, one of the drivers, one of the drivers for higher global rates has been the new issuance from corporate, in that particularly in investment grade market, a lot from the hyperscalers in AI developers here. Even in Europe, I mean, 48 billion in bonds in European currencies this year, how was the European market that gested that new issuance, which has been significantly higher than maybe last year? - Oh, Paul, I think this is a really interesting issue. And obviously, one, you know well from your prior life too. Look, so issuance of Yanki, reverse Yanki, so the hyperscalers issuing Europe has tripled this year already on last year and probably will end up quadrupling. And so it's a really, it in some way. market, so I think in the Eurozone it's taken about 8% of the investment grade bond market this year. Actually in the Swiss franc in Swissies, it's over 20% of investment grade bond issuances by the hyperscalers this year. It's a really meaningful change in the composition of European credit markets. Now the good news is so far that's been digested quite well. Now part of that is because the hyperscalers are issuing at longer duration than a typical European corporate is, but also if I compare the non hyperscalers, they've probably issued roughly the same amount this year in Europe as they did last year with comparable spreads, and the hyperscalers have been the additional which has been absorbed so far. But I think as Torsten and I debate regularly, hyperscaler issuance needs to be up another 25% next year if you look at consensus numbers and therefore they'll probably be coming back even more size to Europe. So I think for us, Apollo that speaks to also the importance of both private and public markets because the sheer scale of issuance is meaning they need to dip into every pond and actually, you know, Swissies and Euros and pounds are very attractive to them. How about in the private market, give us a sense of just the in Europe across Europe, how is the private market, the private debt market in particular, how is that developing and evolving? It's a good question, so I think, as you know, we think about both the private markets being both investment grade and the direct lending, direct lending is a function really of sponsor activity, private activity as you know is down a little bit this year. I think in M&A it's down about 9% year on year, so there's a little bit less on the sponsor side. But actually one of the biggest sources of growth has actually been this sort of investment grade, you know, corporates looking to borrow 3 billion here, 4 billion there for really major projects. And so in a way, the interesting new development in Europe is how project finance is increasingly coming to the private credit market, rather than to the banks or to the bond markets. And that's something I think we're going to be seeing a lot more about in the future. You know, you should understand that Hugh von Steynes, his kids are so damn expensive, he's like an FX tree. It's amazing. So we look at cable, you know, in the Sterling versus US dollar, I know over there it's about Euro Sterling, Francine Lequat taught me that, you're well outside two standard deviations of a really fractured Euro versus I guess a sort of fractured Sterling. Is Sterling going to give way here? I mean, can you imagine a 129 weaker Sterling on cable? Look, this is an interesting one. Remember Tom, I still think about cable a lot as well and I think about even when I first lived in New York in the early 90s, the dramatic change, look, I think that what you're seeing here is that because of the fiscal position in the UK, our rates are going up. We're 6% at the long end, we're 5.4 at the 10 year. I think even your own colleagues at Bloomberg are thinking there's an extra 30 bips in the UK curve because of the, you know, history that we've had in the last few years. So we're needing to pay that little bit more to issue and that's to keep in the currency where it is. And I think it's something to watch, but I don't think I've got a strong call for you today. You thank us so much. You, Vansteenus, we were going to speak of Professor Goodhart, but with the events at hand wonderful to get his banking expertise, Mr Vansteenus is with a pilot. This is the Bloomberg Surveillance Podcast available on Apple's Spotify and anywhere else you get your podcasts. Listen live each weekday, 7 to 10 AM Eastern on Bloomberg.com, the iHeartRadio app, tune in and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal. Wise is the smart way to manage the currencies you need around the globe. When you send money abroad using your bank, you could get hit with hidden fees and exchange rate markups. Here's a better way. Try Wise. Wise uses the exchange rate you'd usually find on Google with no unwelcome surprises. Plus, most transfers happen in under 20 seconds, which means your money arrives in less time than you've been listening to me. It's simple and free to sign up when you download the Wise app. Be smart. Get wise. Teasing sees apply. Because planning for the future isn't only about knowing what's next, it's about making sure you're ready for what you can't predict. Your big business AI opened up a world of promise, but that world of promise turned into a world of pain, cost spiraling data, trapped security and governance risks, multiplying, and ROI out of reach. That's why enterprises turned to Boomi to connect data, apps, and AI, helping them operate securely, efficiently, and at scale. Boomi turns a world of AI pain into a world of AI gain. As Boomi says, we got you head to boomey.com, that's B-O-O-M-I dot com.