tv Bloomberg Surveillance Bloomberg November 5, 2021 8:00am-9:00am EDT
>> the recovery has been kind of delayed with delta but not derailed. >> we are not seeing the sort of rebound that many had expected in terms of employment. >> we have to get a rise in the minimum wage for many employers. >> the only way this economy is going to grow is if productivity makes a comeback. tom: good morning.
jonathan ferro, lisa abramowicz and tom keene. in 30 minutes we will see the state of the american library economy. why is this jobs -- american economy. why is this jobs report different? jonathan: how can we get visibility into next year if we cannot figure out what happened 30 days ago? >> somebody came up to me on the street in new york yesterday and decided -- said, " you are way too bullish." >> what if we get a game changer that challenges the assumptions in the market?
what a few get a return to normal quicker than expected? how much do you get a sudden shift in view is on monetary policy? that's bullish. tom: this is so important. we have dances are key coming up and he does not agree with morgan stanley. jonathan: lisa is standing increasingly bullish on this economy. lisa: bullish on the economy is not necessarily bullish on markets. if we get a shift to full employment, all of a sudden you get a different dynamic for markets than you do for the real economy. jonathan: is this a jobs report
-- tom: is this a jobs are part that can move the market? for global wall street, on radio and tv, this conversation is too important. jonathan: the nasdaq is rallying higher. on twos, a little higher. cry -- crude is bouncing. we can do that with daniel suzuki. throughout that he can join us. it is a lognormal reality. you go up at a certain slope and go down at a different slope. why are you worried about the
slope down? dan: i agree with you guys. the growth outlook is pretty good. that is something the markets missed out on. the narrative on growth got too bearish. our contention is there is a growing bubble within the markets. that is the big concern here. do we know that bubble is going to pop tomorrow? the point is that does not matter. what differentiates bubbles is it is never too early to sell a bubble. you can sell early and it will still be added to your performance.
jonathan: we can build on this. dan: i think on the bullish side of things if you took out the bubble related parts of the market we would be incredibly bullish right now. the runway for growth globally is huge. you were alluding to this but if we were completely normal and we went to today's world, that would be a recession. from today's world, the recovery potential of coming out of a recession. that is what is bullish. the trade discount -- jonathan: it is never too early to sell a bubble. these are the two types of responses we have gotten and, "
you just don't get it, b oomer." lisa: what triggers a bubble? how do we determine what could actually cause the b word? dan: why do we think it is a bubble and what will cause it to pop? it is not just that the market is expensive. the difference between a speculative market and a bubble is it pervades society. we have five criteria for a bubble and all of them have been met with flying colors. it pervades society. why is that bubble going to pop? i see two key risks to the
bubble. one is rates. lower rates have been fueling the bubble. the next time we have a significant slowdown in growth, the bubble is more sick the -- cyclical then we give it credit for. the big gap between expectation and actuality will produce a re-rating down. lisa: the amazing thing about this is the two options you gave are diametrically opposed. the economy is doing poorly, so we enter into a new recession. which is more likely? dan: obviously inflation is cyclical and the fed's response to inflation will be cyclical. you think the rate story will be opposed to the growth story but
if you see what typically happens late in an inflation cycle, even as growth is starting to roll over, inflation tends to continue to rise. that is the rock and the hard place that the fed get placed in late in the cycle. do they try to support the economy while inflation pressures are building? you start to see the underlying growth start to fade. tom: one of the most important books done on this was by richard bernstein called navigate the noise. i want you to navigate off of richard's great book. how do you dovetail the use of cash right now with your caution? dan: that is a great point.
the way i think about crash right -- cash right now is it is a huge opportunity cost but the relative drag of owning cash, in this environment where we are increasingly worried about wants being correlated with -- about bonds being correlated with stocks. the role of cash should increase in the portfolio. if you go back to the 60's and 70's, cash was one of the best assets. tom: give me a number here. dan: you have to be tactical. owning equities -- equity is going to go up here.
our flagship portfolio, having above normal, 5%, 7% cash in the portfolio makes sense. tom: i am at 98% cash. jonathan: what? i'm just saying. dan: you will never guess what year i was born. jonathan: i wasn't taking this anywhere. you always think i am trying to cause trouble. your bond market yields aren't changed. your jobs report is around the corner. tom: we have a great set of voices to drive this conversation forward.
jim glassman will share what he has learned in his travels across this nation. jonathan: we are trying to work out what a lot of those people coming back into the workforce -- lisa: inflation is tightening the screws on this conversation. jonathan: this fear of wage growth as well still seems to permeate the discussion on wall street at times. jim glassman of j.p. morgan chase commercial banking welby joining us shortly. -- will be joining us shortly. from new york city, this is bloomberg. ♪ >> i'm ritika gupta.
a hill -- the race to create a pill to treat covid-19 is heating up. the drugmaker will submit its findings to the u.s. for emergency authorization shortly. an experimental pill was recently submitted to regulators. bloomberg is learning aids have not been publicly identified -- he has not believed to have had close contact with the president. jen psaki confirmed that she tested positive for covid. analysts say that reduced guidance suggested -- peloton
have not had big legislative setbacks. it is employers making up their minds. jonathan: the payrolls report joining us in 12 minutes time. equity futures are up 11. i always love this week,, tom when we put together some of the best guests to comment on what is going on in central bank policy. tom: the divisions we are hearing about 2022, i believe i have not seen this. i am looking forward to michael mckee's official outlook. if you believe in granular
economics, this is the most important conversation of the morning. james glassman has enjoyed sitting in air parts as airlines fight with their staff. he joins us this morning. what did you learn in the city of lincoln? jim: in springfield, the conversation is exactly like the conversation you here in manhattan. everywhere you go, everyone is trying to figure out how to deal with this. there are all kinds of price pressures. we are in a period of huge dislocation. they cannot do much about this. it is going to take some time to
sort this out. ask yourself, a year from now, if we get that back from normal, will we be feeling this dislocation? tom: you did legendary research on teenage unemployment and employment 20 years ago. i want you to do legendary research now on the effect of the tech companies and their idea of getting 50,000 new employees. how does that diffuse across the american economy? jim: it is creating a huge problem. talking to people in grand rapids, the people who have a amazon distribution center next to them is having a hard time
getting workers because amazon pays better. people are getting better pay and they are not willing to go back to their old jobs. for me as an economist, it is music to my ears. this amazon phenomenon is a real phenomenon that is in and a lot of people. it is helping to lift pay for people who have lower skilled jobs. everybody is feeling this. you can see why. how do you do your shopping? you go online. that is the big transformation. lisa: this goes to a question that jim bianco just sent in. are we talking about this all wrong? we are talking about a major
rejiggering of the economy. have we seen a transformational event that makes 2019 and inaccurate template for anything that might happen in 2022 or 2023? jim: i think the fed is expecting that with all these programs expiring now, leisure does not pay the rent so we are days of the pandemic will be slowly coming in. i do not think -- i do think that 2019 is that better template. the fed are thinking about getting that labor force that dropped down back up.
i do not think 2020 is the template for normal. lisa: i wonder how the wage increases dovetail into that? what is the needle we need to thread here? jim: wages are increasing. i think we are in the middle of a productivity boom that will benefit workers. the amazon phenomenon is despising people. companies are working harder to innovate. they will be able to match it too. profit margins are at an all-time record high. -- all-time record high.
tom: leisure doesn't pay the rent! jonathan: he is in the studio, michael mckee >> >>. -- michael mckee. what are you looking for? >> i would guess the estimate is pretty close. it is the participation rate the fed will be concerned about because jay powell has made it clear he wants the rate lower. if we do not get the unemployment rate lower, the only way will be to get the workers to pay up. tom: there was confusion at the press conference over the real wage. where is the real wage now?
>> it is lower than inflation has been running. i have not looked at the real number in a bit but we basically are not keeping up with inflation. it has only been a month or two. you need more data. tom: he sounds like he is in the fed. >> if you are buying services, the inflation rate is not so bad. jonathan: you know what is coming in five minutes? your payrolls report is just around the corner. your market is up five points. tom: look at the two year yield. it is stunning!
the unemployment rate goes down by 2/10 of a percent. that is the lowest post-pandemic number that we have had. it is good news for the federal reserve chairman. the number everyone wants to see is job participation. employment to population ratio is 58.8. that goes up a take from the previous month. looking at unemployment rates for the various minority groups, african-american is at seven, no change. latino goes down from 6.9 to 5.3. a big change. up by 60,000 for manufacturing.
some significant hiring in, this categories, which are generally higher paid. the one we have been watching as hospitality. that is a significant change from last month. we are seeing more people get hired in food services and drinking places. i wanted to check that government numbers because of the problems with seasonally adjusting because of education. -- adjusting because of education. this would have been a lot stronger report worried not for the adjustments made for education and the fact that we are not seeing huge numbers of
people being added in. it is more like a difficult comparison with last year. jonathan: the right side of -- we can talk about the unemployment rate and wages in a minute. this is the market reaction. the bigger move is going out towards the belly on three, but not a major move. futures push higher by a third of 1%, up 17 points. right now i'm looking at the participation rate in the thinking " -- and thinking " there is nothing here that will bring chairman powell in."
tom: major shout out to stephen stanley and the crew. the last two months with the revision we got 843,000 all in. the delta last month gets you with a bang up revision. this is a huge statement. jonathan: i am hesitant to build a pretty narrative two minutes after the numbers drop. it is a high-risk field. a relay strong payrolls report but when you go through the details, there is not enough here to think that the fed chair will change his mind and he soon. we have so much work to do on the unemployment to population ratio. the s&p up.
no matter what we -- what we think about it does not matter. lisa: it will take many months of this type of rep for an order to move the needle -- report in order to move the needle on this. despite the better than expected headline number, what is the story hind this? jonathan: give us a word on that. will the chairman keep waiting? >> of course. if you look at the revisions, one month does look awfully good. we had revision to the august numbers of 117,000 extra. remember that september number
was 104? it is now at 312. what may happen is people look at this and say " maybe it is time to go back to work." people who lost their benefits are going back. the reason unemployment dropped is employment went up and unemployment went down. this is a classic case of exactly why it is a good news. tom: in the heat of the grim 10% unemployment, you look at the median duration of unemployment as that doom and gloom statistic. it plunged this month to 12 weeks.
>> people are falling off of the unemployment rolls, not getting benefits anymore. there are a lot of jobs out there. if you want a job, you can get one. tom: -- jonathan: there is a lift in this market, tom. i like to give people credit. my producer veronica reached out to me and told me pimco -- lisa: i wonder about that participation rate. why is it not increasing at a time when you have people coming back into the labor force? >> it is hard to say. if we had a much bigger jump in
the labor force, you would expect it to go down. we have the same amount of people looking for work, but they are finding it. this may draw more people into the labor market, into looking for jobs. obviously the person most happy about this today is going to be joe biden. wages have gone up higher and faster than inflation. do you see that in the data? >> that should be good news. that is something the white house whiteout. the economists -- the white house would tout. there is a shift. jonathan: then you have cpi with a five handle.
>> the distinction you have to make -- is this reflecting that everyone raised their wages to get people back to work but they do not have to keep raising them. you come back and -- jonathan: great work as always. tidy revisions in the mix as well. tom: congratulations again to the 650,000 crew. a relay timely conversation. -- really timely conversation. jeff rosenberg, let's go to bonds right now.
how do you predict that total return given the swirl we are in between woody's and the economic unknowns? jeffrey: it is a good question, tom, given the context of what we have seen in global bond markets. tremendous uncertainty around central bank policy. look at what happened yesterday with the boe. when you look at the bond market reaction today in the context of that global response, it is muted. it is a world of surprises. if you were wanting to win big when we were on talking about -- not a huge amount of surprise.
relative to what is going on globally, the u.s. is pretty much at expectation. the expectation is that the fed will be patient. there will be lift off that they wilma the so quick to lift off because they're waiting on them for employment debate about the labor force participation rate. mickey said one data point will much change that. you see that in the market reaction. but really not that much going on. tom: we welcome bloomberg radio. negative zero point -- look out -- jonathan: here is the lineup --
bloomberg opinion, rick reid of blackrock. how do you know the teams they support? tom: you have to talk to dr. el-erian. western kentucky, this kid was discovered at the senior bowl. jonathan: i will squeeze that in. you have a good weekend. tom: jeff, to my question on total return, we are in a place is suppose they write about in the text books. how do you construct the
portfolio? how do you actually do what you do? jeffrey: you were talking about negative real yields. the best answer to your question in terms of predicting fixed income or yield levels. in a transition area environment away from global policy response to covid, zero and negative interest rates, it is a challenging environment. bonds will have to adjust. the adjustment they are making is the realization that risk-free treasuries are not going to offer that kind of after inflation returns they had offered.
that may be permanent. that may be semipermanent. it is recognition that it is a much more challenging environment. you need things that can play alternatives to traditional fixed income while the fed gets real rates up to a level that is fairly compensating investors for risks. lisa: you say it might be permanent, it might not be permanent. do we have a real understanding of why real yield are so negative? jeffrey: part of it is a policy choice. negative real interest rates is an accommodation setting. there are two pieces -- one is the secular decline in the new
trio -- part of the story as well, which is what we are debating is how do we get back to some sort of normalization. normalization is less negative. as you look out the door, certainly a return to positive asset rates. that is what we are looking for and that is what the market would expect as you get towards term allies edition. it is about providing accommodation that is where you get strong rates. lisa: you either have the saving rate being so high nobody has a place to put it. or you have a space that we are
heading back to something of a lower growth environment. which in your opinion is more likely and how does it affect your view? jeffrey: those are two somewhat separate issues affecting that rate. the story is part of structure, part of financial repression where you have regulatory and other kind of demands for holding treasuries over and of the expected returns. that is part of the demand story. in the erotic story, -- where we go on both of those is really the long-term question. i think when you look at the other issue we do not talk so
much about, which is the sustainability of fiscal balances, this is where the financial repression comes in. fiscal coordination with feds cannot have investor compensation at the level of real interest rates while having significant impact in government's ability to fund these large deficits. that puts a return on positive interest rates. tom: mr. rosenberg is with blackrock. we will get to ira jersey who is inflammatory on yield dynamics
right now. first i want to go to cameron crise. you have a migration to price up, yield down. how does that work? cameron: the ephemeral reaction to a data point is irrelevant to the broader scope of the savings glut but it is fair to say that over the last three to six weeks there has been a sea change in the market dynamic when it comes to pricing, some of which has been a bucket of duress, people getting stopped out of -- there is an acknowledgment that maybe
the future will not look like the past and maybe this cycle will not be like the last. tom: this is your wheelhouse. the market reaction and the legitimate risk is people adapt to bad, misplaced bets. is that where we are right now? cameron: in certain markets. the u.k. has been a slaughter house over the last few weeks given conflicting signals from the bank of england and people getting shut out of sure -- short sterling longs.
a lot of what we have seen has been a risk management exercise rather than necessarily a sober assessment of what the likely trajectory is going to be. lisa: you have been on the trading floor for years. is there a different tone on trading day than there used to be? cameron: i'm old enough that i can remember a time when you did not have the machines beating you! the initial reaction has taken place over the past decade. lisa: how do you even program the machine? how do you respond to numbers when it is unclear what the
meaning of them -- what they mean? how do you look through the numbers to determine what the blade through response in markets should be -- bleed through response in markets should be? cameron: if you are an individual investor, you will not be the machines -- beat the machines. did wages go good or bad event payroll growth? -- given payroll growth? you could say that an in-line
wage number is a pretty good sign. tom: what is the savings dynamic uc and how does it fold into the liquidity dynamic now -- you see and how does it fold into the liquidity dynamic now? cameron: people have lots of cash. tom: we have to leave it there. thank you. ira jersey's stopped me in my tracks on sunday and we are glad we can continue the conversation.
ira, we are going to a 2% 10 year yield. that is your call for next year. what damage will that due to the american financial system to see yield up, price down? ira: when you look at some of the market moves since the fed meeting on wednesday you have the front end of the yield curve starting to rise a bit. we have to find a terminal rate at this point. are the fed going to hike all the way to 2%, which is what i expect? you are going to have significant inflation over the
intermediate term. that is what the market is starting to divine. lisa: i'm not arguing for stagflation. ira: quite frankly, they are not wrong. the market is pricing for some modest stagflation. real growth being zero and inflation being something akin to 2.5%. that is not signaling a very healthy growth environment. we are pricing for a bad
scenario. lisa: the market is not necessarily the reality of the economy. i was struck by how much to year yields moved in the u.s. yesterday. -- 2 year yields moved in the u.s. yesterday. ira: that has been true for the last 25 years of my career. all goes on in germany has -- what goes on in germany has an effect on the u.s. and the u.k.. i think it was a reality that there is a lot of uncertain tea
and central banks are not on a preset path. they -- uncertainty into central banks are not -- uncertainty and central banks are not on a preset path. we think they will hike once, maybe twice but you have to have a good scenario play out over the next six to 12 months in order for the fed to hike. tom: if i am looking at this jobs data, isn't this a good time for record corporate issuance? cameron: -- ira: we had record corporate
issuance for several years in a row. they have so much cash -- what are they going to do with it? with all of the gearing going on, i would imagine a lot of businesses that might do mergers and acquisitions and different types of buyouts might find a lot of valuations unattractive at this point. if you have a lot of cash, may be you sit on that cash until you see a market downturn, then maybe you start your m&a activity and issue more debt. a lot of businesses are saying " we have so much cash, we do not need anymore." tom: extraordinary to see 60
days in this nation and 800,000 with a revision to the people who nailed this call. this is impressive. lisa: momentum is the word that comes through today to me. there seems to be momentum behind the labor market. given the fact there are so many stores looking for holiday time temporary employees, how much momentum can carry us into 2022? tom: one of the most valuable conversations has been with jim glassman. he says, " at the margin this is
tom: jonathan: a fantastic payroll support and an equity market that keeps climbing. the countdown to the open starts now. ♪ >> everything you need to get set for the start of u.s. trading, this is "bloomberg: the open," with jonathan ferro. ♪ tom: from -- jonathan: from new york, looking at a healing labor market. >> october numbers. >> today's jobs report. >> huge uncertainty on the labor market. >> big hurdles. >> the market is so tight. >> looking for another downward drop. >> the main theme is how many people are