Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20170407

Oil has been rising for two weeks. Lets get an update on what making headlines. Vladimir putin is condemning the u. S. Strike against syria, calling it and asked of aggression against the sovereign state. 59 cruise missiles were fired at a syrian airfield after accusing a syria of using chemical weapons. Tonight i ordered a target military strike on the airfield in syria from where the chemical attack was launched. Rush is promising to help beef up air defenses. The kremlin says only 23 of the missiles actually struck the base. Six syrian fighters were destroyed. President trump says he forged a president in the first few hours of his summit with the chinese president. They had dinner and will have discussions today. He is expected to push him to open Chinese Markets to American Goods. He wants china to put pressure on north korea over its Nuclear Weapons program. Employers in london are having trouble finding workers and brings it may make it harder. From the recruitment and Employment Confederation set across the u. K. , there is difficulty finding employees, especially in finance and technology. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. I am taylor riggs. David returning to our top story, we go to art chief washington correspondent. Take us through the ticktock. When did it get announced . When did the president tell president g. The video ofr was the heinous acts. About the use of chemical weapons, that marked a tone for President Trump. Im told by sources that this was something that he has evolved on in the past several weeks, not just this one instance. Said theyary of state believe president assad has used chemical weapons several times in recent weeks. Change. Marked a the u. N. Ambassador nikki haley said a regime change for syria would not be at the top of the priority list. Yesterday was designed not only to send a message to syria, but to global powers such as russia around the world. David how is that affecting the summit going on down there western mark kevin this will cast a shadow. Beachhere in west palm after a series of meetings with Senior Administration officials and his administration. A they are talking trade and National Security. Emphasis has been put on european allies. Here issuing support for President Trump and his response to syria. Russia obviously is disagreeing with them most notably. China has issued a response. They said they hoped President Trump would utilize political avenues. That is a more tempered responsivity of seen from the europeans. Its not as stark of a contrast as russia. David what reaction is the president getting from capitol hill western mark is this a distraction from his agenda . Will this help them . It shows him being decisive and strong . Spoke to an aid for paul ryan it. He said they been reaching out all day yesterday to brief members about the potential for a use of military force. I am told the Vice President was also someone who is very much in the mix. Congressemocrats in have actually issued a response saying this was the appropriate measure. Pelosichumer and nancy said this was something they view as appropriate. The president will need to get congressional approval should he want more military force. There is some dissent in congress. They are coming from the Freedom Caucus about not getting congressional approval. David thanks. Jonathan its great to have you around the table. What is the strategy here . Hes got to do something that the past administration did not do. They are still trying to figure that out. They are still lacking key people at the pentagon and state department. What is their economic decisionmaking . A crisis can help you figure out what that is. They are beginning to work through how they come to decisions. Jonathan they call you up and say what does that mean the on today . This could be a long campaign. There are questions on this. It complicates the relationship with russia. Ive Commodities Team put out piece last night on how important this is for oil. It shows a more interventionist President Trump and shows with the tightening oil market, this could affect prices. We have an upcoming opec meeting. Alix thats the Market Reaction. In terms of what we to get done in washington, is this something that can unite and bring together a stronger leader . You see this unite a lot of people. A lot of people on the democratic side to support strikes in syria. There are some questions about congressional appear approval. Alix doesnt confuse priorities . Does he have more of a mandate or more to go on. I do think that translates to getting tax reform done. Its a very specific issue. You can bypass the democratic system, but you got to produce a majority in the house and senate. They could not get a majority in the house and senate on health care. It doesnt translate that he is a decider on foreign policy. Getting this complicated issue done on taxes area. Avid washington loves winner. So far, he is not had any wins. He now has this, which appears like a surgical strike. He is going to get gorsuch through. Does that shift momentum . Thats a very important point to bring up. Getting gorsuch through is extremely critical. The strike in syria is also important in terms of notching wins. Countrymissiles into a doesnt necessarily mean a win. There are a lot of unintended consequences in the market is trying to figure that out. Jonathan where the best performing assets out there have been russian assets this year. A lot of people concluded the United States would reestablish ties with russia. To eat to question that again western mark the ruble is weaker this morning. they talked about the attack last night. That will put a strain on that. President trump has been so positive about russia. David is it more than just the relationship . They have military action going on in syria. We have military action going on in syria. One action was to take off some of the two conflicting arrangements. Will we let each other know where our jets are flying . We could inadvertently get into a shooting war. Inadvertently hitting the wrong persons plane is a very big problem. Clearly, they have been asked for permission. They went ahead with it. This is a very big risk. This could be a proxy war. We have seen this elsewhere. This could be a very long proxy work. Alix is this going to be the real test of markets. If it holds up, is that we start to understand the distinction between a Global Growth and what space into policy . There are issues on the political side that will affect markets. This is another piece to the puzzle. I am more worried about the fed tightening. Thinking about the prospects for tax reform. Will the market just selloff . Im not show sure. Desk so sure. These are worrying things. I think about a measured approach and saying i see this risk can see it escalating. Im not going to sell off everything just yet. Jonathan you are sticking with us. Its an allstar lineup of guests. They will be reacting to the jobs report. This morning, its geopolitics front and center. The United States launches dozens of missiles that syria after accusing the regime of killing scores of civilians with poison gas. The president calls it an affront to humanity. The president of russia condemns the attacks. From new york, you are watching bloomberg. Alix it is jobs friday. This is where we stand and expectations. We are looking at 180,000 jobs for march. We are looking at an Unemployment Rate of 4. 7 and earnings coming up 2. 7 . Thats the number. The whisper number is 210. I think you rightly point out, there is asymmetric risk with this number. I think in other words, there is much bigger risk that the market overreacts, if you get a lighter number or a former number at this point. Alix all eyes are going to be on wages. Ours were hurt because of the winter storm. How do you look at the right number for wages . We do have a big storm that blew through. Has an impactys on ours. Thats something were going to sift through. We wrote about this the other day. Theres a much better way of thinking about the income of individuals. Receipts, they are at a 9 base, year to date they were at 2. 2 . There has been a sizable improvement on the wage front. Alix i love that way of looking at wages. You are going to be front and center because of what the fed said, some are worried about an undershoot shooting inflation. What number are you looking at . This is a slack idea. I think its reasonable to think we are at fulham limit we think the Unemployment Rate will get lower. It could be closer to 4 by the end of the year. How that translates, it tends to translate into wage pressure. We are looking at additional wage pressure in the pipeline as well. Jonathan is that data independent . Datalance sheet independent . Mights not seen this sound like an unsatisfying response. Reality is janet yellen is not know who she is handing the baton to in january. They want to get Balance Sheet normalization underway before she walks out the door. It would take a real collapse of Economic Activity for them to not do it at this point. They will announce it in september and start to execute it in october. Thats been a longheld view. Concerned,fed may be the president says its the underemployment. What policy can he pursued to address that . s priorities have changed quite a bit. The idea of making America Great is on a few characteristics. For him to start with health care, its going to be about tax reform and infrastructure as a way to increase wages. Its about regulation. Hes got a huge deregulatory agenda. I think lastly you can talk package. Trade reform he doesnt need congress. He can do a lot of things on trade. He is thinking about new bilaterals as well. David he said jobs are his number one priority. He said he is going to be the greatest job creator in the history of the world. What can he do . What is doable that can make a difference . Let me flag that. Trying to bring brack manufacturing jobs, thats not going to be the stuff that a real ripper of a labor back up his based on. Manufacturing jobs have been in decline for decades. We peaked out from the manufacturing jobs perspective in the 1940s. We have done nothing but slide since then. You could see some stabilization and we have at this point. If you really want to focus on jobs, this is something weve been pounding the table on. Small Business Owners are some of the biggest hiring entities out there. If you want to degrees the engine, need to focus on Small Business and initiate them to engage the hiring process. If you focus on Unemployment Rate, he wants to be the jobs president , how much lower can it go . A lot of people that you speak with, its an important question. Is the goal to bring unemployment to 4 . Do you believe the number . Jonathan weigh in on that subject. Does the fed have to do the same thing . Thats what happening right now. There is a reassessment happening right now. They are not worried about them undershooting. Thats what happening at this point. Thats why they err in more of a hurry to get back to neutral. Ive emphasize this point. People have to realize this isnt semantics. This is a removing of accommodations cycle. Thats what the fed is focused on when they say they want to get back to neutral. We are basically at full employment and we are shifting to the other side. Jonathan you think thats resonating with investors . Is that where the treasury market is so call my even when they talk about Balance Sheet normalization . The fed has done a good job of driving home this is not going to be something they want as a disruptive mechanism. Its going to be a and steady predictable process. It will be easy to digest. ,lix when you look at futures when you figure in the next two years of rate hikes, its 14 2018. What numbers to we need to see to get that extra basis point increase . We think there is a sizable disconnect between Market Expectations and what will be realized. I find it ironic that the market wanted to this fed rhetoric. They didnt apply any of that hawkish i into next years funds. They are pricing less than two hikes next year. Something has to give and we think that will be the market playing catchup. Jonathan theyve already said they might act off from rate hikes. Alix its effectively irrelevant at the end of the day. Jonathan people are going to say give me your estimates for rate hikes this year. Hes going to say who knows at this point. For you, whos going to run the fed next year . Is there any point in me guessing what 2018 looks like . Donald trump has an amazing opportunity to remake the fed. He may see another resignation. There are a handful of names of been thrown out. Names was prominent pulled out and considering ties to the bank bailout. Thats a little worrying from our side. We hope to see more adults in the room come out as fed governors rather than some of the populist that has been there. I would add one final things to tie this up and i think what you have to keep in mind is focus on fundamentals. What does that dictate . Its going to be run at a 2. 5 this year. Its all in the context of increasing as we highlight early on wage pressures and accelerating inflation. Fedends itself to the continuing along this course. David well put. Thank you very much. Up, we are going to have an allstar lineup of guests reacting to the jobs numbers. That will in crude bill gross will include bill gross. This is bloomberg. Alix futures are recovering. These are the individual movers to watch. Etf is down by 2 . Cyber bankdings, represent half of the decline we saw today over in russia. It was down 1. 8 . Off that negativity we have seen it, i want to take a look at some of the premarket. The u. S. Did use 59 tomahawk missiles in syria. They cost about 1. 6 million each. The system is 28 of their revenue. Of theernment is 67 revenue. We are paying attention to that. Up 1 . Is its number two customer is the u. S. Department of defense. That makes up 24 of its revenue. They are the number three u. S. Defense contractor. We are seeing a move upwards. There is a big relationship with the saudis as well as europe. Revenue to the saudis is the Top Contractor there. We see the geoPolitical Risk heat up. These stocks are moving as well. That is alongside payroll friday. That is coming in about one hour in four minutes. Immediate reaction is coming from ill gross. Bill gross. Minutes dedicated to fixed income. York, you are watching bloomberg. Jonathan you are watching bloomberg daybreak. We are one hour away from the payroll report. Futures are up 12 points on the dow. If you switch out the board quickly, in treasuries, this is how things stand 180,000 is your estimate from the jobs survey which we will get in 60 minutes time. This is whats making headlines. The u. S. Has raised the stakes with russia, launching an attack on its allies syria. Navy destroyers fired 59 cruise missiles at assyrian airbase. President trump says the airfield was the one from which that gas attack was launched killing more than 70 people. The u. K. Has endorsed the u. S. Action. We fully support this strike. It was limited, appropriate, and it was designed to target the aircraft and equipment the United States believed were used in the chemical attack and to from president assad carrying out future Chemical Attacks and we fully support that. Russias president Vladimir Putin called the u. S. Attack and act of aggression against a sovereign state and the kremlin is promising to help syria beaver up its air defenses and says 23 of the 59 missiles actually at the base. Word of the attack came as President Trump was in florida with the chinese president. It may underscore the president s contention that the u. S. Is willing to take action on its own if china does not treasure north korea on its Nuclear Weapons program. The talks are expected include trade with the president wanting the chinese president to open Chinese Markets to u. S. Products. The senate is on the verge of President Trump the neil Gorsuch Nomination to the spring court. Republicans had to use the socalled Nuclear Option. They change the rules soy symbol majority was needed to advance the nomination rather than 60 votes. That destroyed with little bipartisanship remains in the senate. This is bloomberg. David i think you have breaking news. African the south ratings have been cut to junk of fitch. This follows the move by the same thing. Standard poors rating was cut to junk by fitch. They say this weakens the governance and finances so its indication. Alix you are seeing weakness in the rand. Of dollarrand is up by 2 10 1 but the real worry is dead. There a dissension between local debt and sovereign debt. Where we will see will we see most of the pressure . Jonathan the bulk of the debt in south africa is a local, not foreign currency so thats an important distinction. The amount of passive aggressors investors that will have to sell our great. This will lead to a reshuffle in policy changes but that could be a good thing. David we will turn back to the big story in syria as the primus or of australia not once but as the Prime Minister or australia not once but twice is now president of the asia society and still with us is barclays sean. Welcome to bloomberg, mr. Prime minister. Lets talk about the strike against syria. What is your reaction as a former head of a government . What President Trump has done is absolutely right. Have worked with closely and im a good friend of president obama and i thought his decision was not the right decision. If you are silent or inactive in ofponse to the continued use chemical weapons, you start to normalize it as a global behavior. I think it has been absolutely right to respond quickly, sharply, directly and we will see how effective it will be. David as you suggest, its early on. As a candidate, donald trump said he wanted to read this reestablish United States leadership. This is perhaps a first step in that direction . I think the general view from across the western states including europeans who have been skeptical of President Trump leadership would be that this is a step in the right direction. It divides us strength, resolve and direct response to what all as the ofregarding sanity of the use of weapons of mass destruction. David lets turn to the summit with the president of china and start with reaction from china. A fluent mandarin speaker so what has been the reaction . Its interesting. Youve got the russian direct condemnation. Youve got the europeans, french and german joint statements, saying that assad brought this supportingwithout the attack. The chinese position is interesting, its one shade different but it says we chinese the always said we oppose use of chemical weapons under any circumstances and support the u. N. Investigatory commission. They have not used language directly attacking what has been a unilateral u. S. Attack. Alix does this make them more or less concerned about north korea . Of the question of sovereignty of individual states by syria or north korea, they would see this as more of an indication the United States under this president is prepared to take a unilateral action. There is an ocean of difference atween, frankly, an attack on race in syria and taking out the Nuclear Capabilities of the north korean regime. Have anill this effect on the meeting in florida. I dont think so. Its tough because youve got these two very large balls in the area in each of one of the session each one is complex. In terms of the atmosphere and contact of the u. S. China relationship and as it relates to north korea come i dont think it will derail or complicate something which is intrinsically important in the eyes of the chinese and i think the u. S. President as well. What we have heard so far are platitudes as the chinese president is saying there is a thousand reasons to make this relationship work. President trump says where developing a friendship. What does that mean publicly or privately . Are a his team, there couple of things. From north korea to National Security initiatives and on trade. For the administration, they hope to get concessions from the chinese. If the Chinese Government says u. S. Automobiles, we will lower the tariff and offer concessions, that might be a good step forward. Mooring failure of tpp forward, theres an opportunity in asia and for President Trump, as time and effort for the u. S. Trade. What do the chinese look to get out of this . What does the president of china hope to get out of this . There were segments put out in the chinese linkage media. Chinese language media. It looks pretty upbeat. , the chineseties attach great importance to whether their present it is treated with respect. There are wonderful acknowledging remarks from the President Trump on the chinese president s wife. There is a song which made the president s wife famous when she was a singer. Chinese poetry so all of that is good. This could have turned sour very early. I am looking at the text that have come out so far. Apart what you just referred to about the thousand reasons to make this work, he says the challenge for you and i, mr. President , is what is our vision for the next 45 years . That will depend entirely on your political resolve and my political resolve. He goes on to say lets look at this meeting as a new turning point in this u. S. China relationship. He then goes on to say lets try to become better partners on stuff which is hard as well and then talking about the security agenda, talking about Nuclear Nonproliferation which is code for north korea and proposing working groups on different achievements. This is detailed and quite constructive. Overall, half of day one is going well but today is the meat and potatoes. Jonathan we will leave it there, thank you very much. South africa ratings were cut to junk by fitch following the move by standard and poors doing the same thing. The downgrade reflects the views that recent political events including a Cabinet Reshuffle will affect public financing. The South African rand is taking a leg lower. Chartks like this on the as the weaker rand is up by half of 1 . Bill gross and, gary cohn all reacting to the jobs numbers. This is bloomberg. Taylor coming up in the next hour, the Capital Fund Manager bill gross. Jonathan joining us now from johannesburg is our South African financial reporter. Talk me through the significance of the rand. Significant and it is the second Rating Agency in the space of a week or so to have downgraded south africa to noninvestment grade which is junk status. It is not just south africas foreign currency rating better than downgraded but also the local currency rate which will increase weakness within the South African bond market and currency market. We have seen the currency extend losses to around half a percentage lower. Against the u. S. Dollar. On a day when south africas marching against the president and step down from his seat, its key and should send a clear message. As far as the fixed Income Investment concerns, what does it mean for those guys and the indexes . It is certainly a worry for them. Fitch had mentioned that the liabilities or continued liabilities which are already possible at this point in time will increase weakness within fixed incomeso the earners will be a little worried about the situation moving forward. Their word about what that means for their funds and money. If south africa drops out of the world Government Bond index, all that is missing is one more Rating Agency to downgrade them. The worry from that point on a certainly with moody still to come. Anathan there has been policy continuity story. This is likely to result in a change in economic policy. Has the government backed up that rhetoric . Will we have a change in policy . It does not look that way as yet but that is based on comments from the finance minister. He sternly said numerous times that they will not change fiscal policy in the measure by which south africa goes ahead with revenue collection as well as spending in government but the rhetoric from the ratings agencies that they fear the priority now will not be focused on Fiscal Consolidation but more so on assuring that other may begin priorities to increase. The focal point now shifts for the local economy and that is what is making the likes of fitch very nervous. A vote ofe will be noconfidence on april 18 for the president of south africa. It has been blocked several times as well as impeachment. Do these ratings downgrades change that conversation . And evenpossible before this move, it was one where it seems like this one might go a different route or perhaps change in terms of the narrative in which the vote of noconfidence goes with it. Whether it will succeed or not is a different story. We have seen president jacob survived votes of noconfidence in the past and quite a few scandals. Whether this will succeed is a different story and am not sure whether this change is that narrative at all but it certainly does put another tent and what has been a president that many have questioned. Alix thank you so much for the insight. Bonds at a high you have not seen for a few months but bank of america says they like 10 year local bonds in south africa because of political headlines and inflation trading. Jonathan you saw a bond auction earlier this week. The demand there is still very big. The reach for yield versus Political Risk, the yield is winning out. David it may be just a good deal for yield and they say they will fix it. Bank of america says declining inflation could show us a rate cut. Oming up, and allstar lineup in less than an hour, bill gross, Mohamed Elerian, and gary cohen. This is bloomberg. Jonathan from new york city, we are about 40 minutes away from the payroll report. And we goe stable nowhere on the s p 500. Treasuries, they are off by about two basis points. 180,000 is the report is the prediction for the jobs report. Worldwide, in a letter to shareholders, Jpmorgan Ceo Jamie Dimon asserted that government imposed Capital Requirements a big banks are holding back lending and relaxing men will spur Economic Growth. Neel kashkari responded saying both assertions are false. He joins us now. Great to have you with us. With a simple question what is the objective of taking on a wall street chief executive so publicly . Is to call out risk where we see them and propose solutions. When a wall street leader, i know jamie dimon like him, when he says things i believe are incorrect, its my responsibility to speak out. Too big to fail has not been solved in the biggest thanks are still too big to fail. The American People and congress offeredknow that and we them potential solutions in the form of substantially higher Capital Requirements. Jonathan i would be interested to find out if you are looking for publicity and get a more senior role on the fomc. What do you say about people saying that . Arguen somebody cannot with me on the substance of the analysis, they are left with criticizing the messenger. I interpret that as a white flag of surrender. I will take that criticism all day long. It means they cannot argue with the analysis. The analysis stands on its own. David you have raised your concerns about this for a couple of years. How many people who are Federal Reserve governors or president s agree with you . Do other people share your view . Haveveral do and several reached out and said thank you for continuing to beat this drum and raise this issue. My hope is that if we keep talking about it and keep pointing out the facts and showing where other folks are wrong who say we have solved this and we will motivate people. I like the fact that there are some news stories coming out of the ministration saying they are looking at financial reforms to big to fail and when he to all keep pushing in the same direction and let the American People decide if they want to live with the Financial System or the biggest banks are supported by taxpayers implicitly or explicitly or do we want a more rational system or the taxpayers are not on the hook . I want the letter latter. Its up to us to give them the facts so they can make a decision. If other members of the leadership feel the way you do, why are we not hearing from them . Should make their own call on what they are comfortable taking on. We have a lot of issues to deal with, Monetary Policy is the core mandate and i am outspoken on Monetary Policy at the right times why leave it to my colleagues to decide which battles they want to pick. The other thing is, i am one of dudley, people and bill who are in the middle of the financial who were in the middle of the financial crisis in 2008. Its points out how difficult was to stop the dominoes from falling. Maybe thats why i put this at the forefront of the issues i am focused on because i was one of the First Responders trying to arrest the crisis. Alix front and center now is glasssteagall. Is there any good in this idea . What does it do . Im not sure that it does a lot. Im not opposed to a but by itself it does not address too big to fail. N 2008, we had investment Lehman Brothers and bear stearns run into trouble with Systemic Risk to the economy and commercial banks to the same thing. It was not simply the commonest of these two activities that created the risk. To me, the most important thing we can do whether its an Investment Bank or commercial bank or combination is increase the Capital Requirement of the biggest institutions. That is the buffer that protects them and protect the taxpayers if they make a mistake. If beyond that we want to separate the activities, im not opposed but the separation of the two by itself will not address too big to fail. You hike and normalize in fed policy at the same time . In terms of the Balance Sheet . Alix yes. My preferences we put out a detailed plan on when we will normalize the Balance Sheet. There has been conflicting views and build the ugly seems to think we need to take a pause in rates. The consensus in the fed, it was not clear in the minutes. There is a wide range of abuse. The minutes reflected the fact that people are still thinking through a wide range of options. As we have further deliberations, perhaps my colleagues will convince me that what i have articulated maybe not be optimal. We want to look at the analysis but i am focused on the jobs report today and i want to see the Unemployment Rate stays around 4. 7 or starts to drop. Im trying to see whether the Labor Force Participation story will continue. I hope it does. At some point it will run out so im looking for signs when that process will run out. This will be an important indicator of when it will be time to normalize policy whether by increasing the federal funds rate or by shrinking the Balance Sheet. 180,000 is the estimate for the jobs report. If we increase, what does that tell you about the labor market . It does not tell me a lot by itself. You need to combine that. At 200,000, that as well in excess of what we need to keep up with population growth. Then you have to look at the headline unappointed rate. If that stays at 4. 7 while we create jobs of that rapid pace, that suggests that people are entering the labor market were not leaving and thats helpful. Thats what we have seen over the last couple of years i hope to see that continue. If you hit 200 and the headline Unemployment Rate is dropping, thats an indicator that maybe we are starting to use up that slack and it could be closer to time to normalize Interest Rates. Jonathan thank you very much for joining us. Coming up, we continue to count withown to payroll friday reaction coming from bill gross, Mohamed Elerian, and gary cohen. You are watching bloomberg. Jonathan expectations shift higherjonathan ahead of payrolls. How much can be squeezed out of the labor market before which is begin to surge . They noticed that lawsuit innches missile strikes syria. Russia condemns the attack. Ands between president xi President Trump headed to day two, perhaps with more at stake. We set you up for payrolls friday. Futures are stable. Almost half of one point on the s p 500. The euro softer. The dollar stronger by. 2 . Check, take aety look at dollaryen, well off the lows of the session. The vix had been up. Crude rolling over just a touch. Strongest commodity of the day. Lets get an update of what is making headlines outside of the business world. Taylor riggs is here. Taylor russia is promising to help syria build up air defenses after a u. S. Missile strike. Firedestroyers filed 59 missiles. It killed more than 70 it was at the site after a front were a gas attack occurred, killing nearly 70 people. Theident trump it is in interest of the United States to prevent and deter the spread and use of deadly chemical weapons. Taylor russian president Vladimir Putin called the u. S. Attack an act of aggression. The kremlin says only 23 of the u. S. Missiles hit the base. Nejra, President Trump says he forged a friendship with chinese president xi. President trump is accepted to push xi to open Chinese Markets to American Goods and wants china to put pressure on north korea over its Nuclear Weapons program. Global news 24 hours a day powered by more than 126 more than 120 countries. David for more stories out of syria, florida, russia, we go to Kevin Cirilli in palm beach, florida. I said stories because we have the syrian missile attack, the xi summit, and this little thing called the payrolls number. Is this administration going to toe any time and bandwidth Pay Attention to the economy, which is what the president said he was going to do when we came to office that she came to office . Kevin we are eagerly awaiting the interview with gary cohn. This is an issue addressing multiple administration addressing multiple issues on many fronts of the syrian missile attack last night dominating so many headlines today, implementing the policy perhaps for the next several weeks. Internationally, the response has been pretty supportive for the Trump Administration, especially european allies, praising President Trump for his spots. Isna, where president xi huddled here in florida, issued a tempered response, saying they would like to see the Trump Administration and the u. S. Use a political evidence to address serious avenue to address syria. This will be dominating for several years into the Trumps Administration first term. This is the backdrop. Russia is saying they disagree with this, and the u. S. Is drawing a line in the sand, so to speak, against russia. Secretary of state Rex Tillerson yesterday saying russia was either complicit or incompetent in dealing with russia, and they failed to follow through on their 2013 commitment. This bottom line, what im here from capitol hill, is a signal that the administration has heard the concerns of folks in washington, that they are not taking an aggressive tone and policy position against russia. These as we all know, summits are highly scripted. You have any sense from your reporting with the president down there in west palm beach, do you have a sense they are changing the agenda to deal with the syria issue, or will they get back into trade, which going into this, we thought would be one of the top items on the agenda . Kevin it is a great point. In speaking with folks down here, as well as those in President Trumps political down, they note the team here with him. Of course President Trump and president xi will meet privately and have already met presley, but treasury secretary Steve Mnuchin is down here, gary cohn is down here, as well as commerce secretary wilbur ross. They are having meetings on a host of other issues besides syria, talking about trade agreements, and, again, the National Security issue on north korea. Withignal sent last night syria is also a signal for north korea, and this is also a signal that this administration is going to be very different than the previous president , barack obama. Jonathan i want to bring in alan krueger now, of princeton university, the economics professor and former white house chairman. Economic question several times if you carry on printing 180,000, what is it say about labor market slack . Alan as Neel Kashkari mentioned, they are separate service. I think we are at the bottom of labor market slack. Maybe there is a little bit left, but we are seeing wages pick up. I think that is helping. We cannot continue gaining 200,000 jobs a month for much longer without risking overheating the job market. Jonathan i heard that last year this time last year. Everyone said get ready for 100,000, 120,000. Here we are one year later, 180,000. Alan if we keep saying it eventually we will be right. [laughter] alix everyone is right twice a day on a clock is that how it goes . The alternative that is we have a slowdown and hit a recession before we reach the end of the slack, but i think we will be facing if you look at demographics over the next 5, 10 years, more of a laborshortage economy, and that is why it is so important to reform our immigration policy, improve training that companies do what they can to retain and train their workforce. Jonathan you talk about labor market slack, and how it is diminished average Hourly Earnings 2. 7 year on year. That is the expectation today, decent, but not precrisis stellar. What is the slow kind climb higher telling you . Alan dont forget, inflation has been low, so real wage growth has been strong over the last 2, 3 years. From that perspective come the labor market looks like it is getting closer to full employment. Alix digging deeper, this is a great chart that looks at the wages for high service paying jobs versus low service paying jobs. We have seen the high paying jobs really lag, but recently they seem to overtake or is very close to the lower paying jobs. This is more significant for Wage Inflation if we see this kind of rise. Alan i think that is a sign the labor market getting tighter. Usually when the labor market gets tighter, you see stronger which will have the bottom, which has lagged behind. There are other things that are different in this recovery. Federal minimum wage is not increased since 2009. If you go back to the late19 90s, we had a healthy boost in the minimum wage that raise wages at the bottom as well. Alix we need that to see what happens to inflation. Due you expectis us to get to 4 . Alan i would like to see us get to four. Alix what is that due to inflation . Alan the fed has a long way to go before Interest Rate are restraining the economy. Real Interest Rates are still relatively low, and i dont see the kinds of bubbles building up that can necessarily burst the recovery in the next year or two. So, i think and i said this when president obama was in office, i will say it now this could be the longest recovery we have ever had. It will not be the strongest, but the longer it goes on, the more it helps us solve problems. David what will be the thing that tells us we get the labor scarcity. As a labor economist, what you look at . Force forok at labor inpatient rate, work hours average hours. We say they are working parttime, but preferred to work part that fulltime. I also look at those who prefer to work parttime that are working fulltime. I look at labor force dissipation by Different Group education Group Education level, sex i look at the flows. Do we see people coming back to the labor flows . Interestingly, when the economy heats up, people tend to stay in the labor force longer. But you do not see that Much Movement of people that have left the labor force coming back, and that is one area where Public Policy needs to focus. David what are the structural factors we should take into account that might adjust these numbers one is demographics, baby boomers retiring, and the other is technology. Alan both of those things are going on. That is where were are headed for a labor shortage when you look to demographics. Were going to see slow growth in the working age population. That will be compensated by a increase in the Labor Force Participation by older workers. We have seen an increase in their employment rates over the last again, and more investment in technology to substitute for labor. David might the technology also compensate for the loss of workers . Might that make up for it, or overcompensate for it . Alan that is been a concern for the last 100 years and distinct calculation, if you look over the last 20 years, half of the net job growth was in new jobs jobs at the dot exist 20 years ago according to occupational coding. The labor market is costly influx. I think it means that we need our education and Training System to be nimble, to be responsive to jobs that did not exist 10, 15 years ago, where jobs are coming in the future that do not exist today. What factors do you see have a lot of tightness in the labor market and what areas have too much lag . Alan believe it or not, manufacturing looks tight. We have devolved the Education System focusing more on post secondary education, not on apprenticeship type programs, or on shop classes. Skilled manufacturing jobs are particularly tight. David adjusting. Alix interesting. Also oil workers cap that is why i was leading you. Coming up, and allstar lineup of guests bill gross, Mohamed Elerian, rick rieder, and of course, alan krueger. This is bloomberg. David alix the jobs number out in about 15 minutes time, but the backdrop the u. S. Strikes in with 59 cruise missiles. Still with us, alan krueger. Chris, i want to start with you from a policy angle did the role of the u. S. In the world just change in the last 12 hours . Chris i think the world was waiting to watch how President Trump would respond in his First International crisis, and this is his First International crisis. When he saw the images, he got his National Security teen, which is wellrespected and took action. I think from a global perspective, other leaders, whether it is north korea, china, i think they will take this into consideration as they figure out what the next steps are, the south china sea, or testing missiles in north korea. Alix a different world geopolitics, but on the market front we saw a flight to safety that has reversed itself. Do investors need to hedge against geoPolitical Risk or move past it and focus on the fundamentals . Think it will focus on the fundamentals of companies, looking at what can get done from a policy perspective. Historically, an International Incident tends to focus the mind of d. C. Politicians can get over the petty differences and look for opportunities to look Work Together to make sure the u. S. Can be a global leader. It could be for good for if a structural reform, Health Reform in the future, and it can unite the country behind the president because the most president ial thing the president can do is acting as commanderinchief. David unilaterally one of the confusions about this presidency people think of him as an isolationist. He is a unilateralist. What is is tell the markets that he is much more inclined to act on his own he does not like to bring of people along with him . Chris from a perspective as commanderinchief, he can do that. When it comes to legislating in d. C. , that gets a little more complicated, and we saw that with Health Reform issues. We think he will take information and try to bring people the consensus, and then make final decisions. I think overall this is a net positive to getting policy action done over the next year that the market is really looking for tax reform, health care reform, or infrastructure spending. David alan krueger, is that right or does it drive him closer to thinks he can do unilaterally domestically because on trade he can do things unilaterally, on deregulation. Is it more look at to refocus him in those areas . Alan first of all, i have sympathy for the position he was put in. I think he was being tested. I think it does cross a line when a country uses chemical weapons against helpless children, families. So, i am not going to criticize the move that he made. I think this is going to be much more difficult for him. Itll take a lot of energy, a lot of attention. We have seen land came to the Health Care Bill he did not invest in reaching out to the external groups, built in the coalition. One area where this might change policy little bit, give lift to his plan to expand military spending. Maybe it helps make the case we should spend more on defense. I think it will make it much more difficult for him to do some of the core things we need to do in the country, invest in infrastructure, as example. Jonathan so once it say that it will unify politicians, youre saying it to the opposite this morning . Alan just look at what rand paul is doing. We are in a polarized age. Look how long it took to pass the Affordable Care act. It took decades. It took well over a year in the congress under president obama. I think doing something major like tax or form copy of tax reform, is even harder than Corporate Tax reform, which is a heavy lift. I think this is going to be a distraction from working with the congress on those issues. Up randris, he brought paul. He and other members of the Freedom Caucus opposing the move in syria, and then you have Chuck Schumer for it. With a new rhetoric the about how President Trump and democrats can see eye to eye on things rather than trying to get the far right other Publican Party on board . It is goodelief is to distract people from what is going on in d. C. A little bit having an International Incident allows the people working on the nuts and bolts of tax reform to get out of the spotlight. You dont have reporters camped offices, or bloomberg reporters kept outside of offices, chasing Members Around the hallway because there are other things for them to focus on, and generally speaking, big deals get done when numbers are able to get out of the spotlight, worked behind the scenes, and advance the ball down the field. With regard to democrats, the president has said he going to work with anyone. I think as long as the president s Approval Rating is below 40 , it is unlikely the democrats would want to work with president s. The big best opportunity to make gains in the 2018 election is to have a president whose Approval Rating is below 45 , and thiss president this president s approval rate would jump if he is actually a dealmaker instead of just being talked about as a dealmaker. David you follow washington cut to the chase how do you handicap the idea of meaningful tech reform this year tax reform and to what extent does the Nuclear Option effect that . Chris i dont think the Nuclear Option affects that at all. That is something democrats had to do as a payback for judge garland and a bone to throw to their base. They did not want a liberal tea party to exist. With regards to things happening to the end of the year, we believe something can get done. How big that is depends on how they can get democrats across the south had i think three Democratic Senators voting for judge gorsuch is noteworthy and shows there could be bipartisan agreement on some things with democrats that are up in 2018 in swing states. David chris meekins, thank you for joining us. Alan krueger will be staying with us. We are minutes away from the jobs report. We will have an allstar lineup of guests including bill gross, Mohamed Elerian, rick rieder, and gary cohn. This is bloomberg. Taylor this is bloomberg daybreak. Says investors have agreed to by 9 of the stocks. He tried to avoid tapping shareholders again, but Deutsche Bank was unable to find a buyer for the Consumer Banking unit. Twitter is suing the Trump Administration over its attempt to fire a rogue employee who slammed immigration policies. The administration is demanding reveal the identity of someone who is behind the socalled alt feeds. Calling for legislation. Gary cohn met the same argument earlier this week, calling for a return of the glasssteagall act. Among those on board, Senators Elizabeth Warren and john mccain. We will talk to gary cohn later here on bloomberg tv. That is your Bloomberg Business business flash. Jonathan in a letter to shareholders, jamie dimon says requirements for capital from banks are holding back growth. Neel kashkari said those a source assertions are demonstrably false. We spoke to him earlier on. Neel kashkari our risk is to call out our job is to call out risks when we see thing. I know jamie dimon. When he says things that are incorrect, it is our responsibility to speak out. The fact is too big to fail has not been solved. The biggest banks are still too big to fail. We have offered potential solutions in the form of substantially higher Capital Requirements. Jonathan alan krueger still with us. Professor, your reaction to that . Alan i see elements of truth in both of them. I think that it is still too tight in the Housing Market. I think some of that has to do with adjustment to the new regulations, the delay it took in getting regulations out. I agree that we need to have a tough capital regime on the largest banks. On the other hand, i think doddfrank made a lot of progress on too big to fail with resolution authority. I think we are in a different regime. Youll see what happens when we need to dissolve one of these banks. I think doddfrank probably would too far on smaller banks. Jonathan how tough do you need to say the glasssteagall approach . Alan i dont think glasssteagall addresses those problems. I would refer people to what dan tarullo said about glasssteagall. Jonathan well go to the job summers. Joining us, brad bechtel. The estimate is 180,000. What are you looking for . 145,000. Fries is at we moved the forecast 180 185,000. We moved the forecast up. It feels like the market is expecting something on the high side, there is a contingency looking for some weatherrelated give back. We have a little bit of latitude on the support given a wide expectation range. Jonathan in terms of how the payrolls report sets things up in the market, i do not remember the last time eurodollar overnight was the slow going into a payrolls meeting. What is the signal in that . Brad absolutely. Volatility remains low especially in light of the military action by the u. S. It is externally. The market is relatively complacent. We have very covetable, at least, in terms of where things stand, and to me, that is a little bit surprising. I think risks are still underpriced relative to what could potentially happen. It is a bit surprising. Alix what is the asymmetric risk to the dollar on the jobs number . Brad if we get a really bad number it, kind of, has to be extreme to move, given the wide range, but something around 100,000 could see the dollar selloff and make a 10year yield that has been testing the 230 level, if we get through there, the dollar could flash. Something like 100,000 could do that. If we get to it at 25,000, that could be good for the dollar. Average Hourly Earnings is always important and even more so this time around. 4 would be a positive surprise. Something like zero would be negative for the dollar. Jonathan how much does the safety did spurred by the tax overnight cloud today . Brad there is a little bit of a dollar bid going in, treasury bid as well. A lot of that was given back as we got into the new york morning , given the way the rest of the world responded, which was relatively positively. There is a safety bid there, and i think people are going to potentially buy more dollars going into the weekend given the unknown. Alan what is the cross to watch alix what is the cross to watch . Brad i would look at dollaryen , and i on that. Jonathan always good to see you. Alan krueger, the 22nd jobs they guide. Go. Alan i used to hate it when adp canaan high. It raised expectations. I think theres pressure on the white house. Jonathan pagel, pressure on the white house. Futures, one hour away from the a little bit softer. We are down by nine points on the dow. Not even. 10 . Global equities this morning. Price action is subdued. Switch up the boards quickly. Treasuries what a repricing we have had. 2. 31. Yields are up three basis points. Market, eurodollar, down by. 10 . The cable rate comes in by. 4 . A little more acute pain for the pound because of with data. Here the United States, 180,000 is your estimate for payrolls in the bloomberg survey. Here is the payrolls report from d. C. Spend this 1do you just 98,000 jobs were created. 98,000 jobs in the month of march, but the Unemployment Rate falls to 4. 5 , the lowest since may of 2007. 2 to a 2. 7 up annual rate. Revisions to january and february both months revised lower, a total of 38,000 fewer jobs created in those two months. The biggest change in hiring retailers let 30,000 workers go during the month. Hired 11,000, as did oil, gas, and mining companies. Just 100 were coal miners. 6000 were added to construction firms. As for the unemployed rate, 145,000 people come into the labor force, but that was more hiring than firing, and that is why the number goes down to 4. 5 , the lowest since may, 2007. Just 98,000 jobs were created during the month. These are two separate surveys. It will be interesting to see how the politicians spin this 1 good news, bad news which do you want this one. Jonathan want first . Jonathan yields are up by about six my points. Treasuries yields grinding lower. The 10 year at 2. 28. If you look at the fx market, the dollar rolling over. Euro now positive on the session, up. 2 . Briefly, the cable rate coming in. The bid on treasuries on the back of a huge downside surprise. Alan krueger, your reaction . Alan number one i said we would see job growth slow and the labor market is tight . That is what we saw. 168,000 in the Household Survey, but the Unemployment Rate fell. 2 of the labor force the patient rate held steady. This is what one expects to see when you are approaching full improvement employment. There markets are wrong anticipation . Alan that would be my initial reaction. Alix what about 4. 5 will they have to lower that or stick around this level . Alan the fed has to make a decision is 2 inflation a ceiling or a target . We have been below or above for little bit of for little while. I think it is ok to run the labor market a little bit hot given how loose things have been and how low inflation has been. Jonathan the market fading. Treasury yields down by 4, 5 basis points. The two life year down by 1. 5 basis points. We can cross over to bloomberg surveillance where tom keene and david gura are standing by with bill gross. Fromjoining us, bill gross janus capital. 170,000 was the statistic. We went last 89,000 with a bad revision which really gets you down somewhere in the vicinity of a 50,000plus statistic. A big disappointment. Bill gross, good morning. You are in newport beach, california, where the weather is never an issue. Are you going to say this is about weather in the northeast where i had a miserable winter . Bill i would never totally blame it on the winter, just as i would a baseball game opening in early april the game is the game. It is a weak report. The number is much less than expected. Trends the beginning of a , but the Interest Rate themselves are already very, very low, and i wouldnt expect Something Like this to continue to push Interest Rates lower. The push coming, i think, is in the curve, as opposed to the absolute level of Interest Rates. Tom one of the great distinctions making this labor report to the greater economy alexander of Morgan Stanley with a dovish call even she suggested this is a fed two with , three rate increases out in front. Is this the kind of report that could be enough to nudge the fed parlor game to a more dovish janet yellen . Bill well, perhaps, if it were to continue for another month or two. Anything below 200000 and trending downward would indicate a weaker job growth economy, and we know the fed points to job growth, not necessarily gdp growth. Less,owth has been 2 or plus or minus, for some time now. I think the fed, in terms of their minutes, was becoming increasingly dovish. I think dudley, this week, has indicated that he would look at tapering, and combine it with the potential for Interest Rate increases in terms of a combo, so to speak. That, to me, is an indication of a gradual, slow pace, which i have indicated the fed has to do going for because a highly levered economy. Tom i want to say, david gura, risk off trade even swiss franc comes in stronger. Yen is stronger. We did not see that off the syria attacks, but we now see that, david gura, the yen moving stronger. Why dont you jump in question jump in . David g. we had janet yellen calling these numbers noise. I want to ask you about the integrity. The white house said it trusted the data when the data was good. What you expect them to do in reaction to this data . How you regarding the data right now . Bill i think that it can be noisy. Fake data not necessarily fake, but noisy data can move markets in the shortterm and not necessarily over a longerterm basis. I think the focus for Economic Growth Going Forward is not necessarily job growth, productivity growth, and as we have known for some years now, productivity growth is hovering around a 1 level. The questions as to why are numerous. I would suggest they are at 1 , which would imply a 2 gdp growth rate simple because there ,as been a lack of investment and something having to do, perhaps, with the paradox of thrift, lower demographics, changing demographics it just seems that investment is going into stocks and Financial Securities as opposed to the real economy, so if 1 productivity continues to persist, and we have 2 gdp growth rate, that is not sufficient, really, to make investors happy. Market. we see this move. The other big market move we have seen recently was last night around the timing of these attacks on syria. When you where the fundamentals against the political realities, what is the bigger Market Driver to you right now . Bill well, on the shortterm, certainly, bonds are a flight to safety. We saw that last night. They came back a little bit. Stocks, being risk assets, our riskoff in the very short term. Ultimately, it is interesting, in terms of conflict and in terms of war were talking several years here as opposed to several days ultimately, war, conflict, and reflation, and equities tend to benefit from the giving up of the defense establishment, and profits related to it. So, it is a question of time frame shortterm, bond friendly, longterm, perhaps not so bond friendly. Tom bill gross with his worldwide on bloomberg television, bloomberg radio. Thrilled to have him with us. With janus capital. Bill, i looked through your portfolio and you have some corporate paper, and i see you are grabbing coupon here. How will you protect from bond losses . Help listeners and viewers who are savers how do they protect themselves given the higher yields to come . Well, that is the dilemma of a bond bear market always has been. We have not had significant bond bear market for a a while, but what you do, tom, as you suggested, shortterm paper you cut your duration. That is a fainting us and saying you lower the maturity of your paper, whether it is treasury or corporates, to what fits your mood, or what fits your fear level, i suppose. What does that mean . Typically, the bond market has an average maturity of seven years. If you want to be protected relative to higher rates, and the negatives that happen with a sevenyear bond, reduce maturities to five, 4, 3, 2, 1. That is what we have done. Our average maturity is basically zero, or even a little bit less because of derivative exposure. Duration is the key, and keep it short. The problem with that, just to finish, is to say the yields on the short end of the yield curve are much less, and if you are striving for yield and grabbing for you, that hurts you. Jonathan that was bill gross alongside tom and david gura reacting to the payrolls report. If you tuned in just tuned in , 98,000, a significant downside surprise. The median estimate at bloomberg was 108,000. The previous number revised lower to 219,000. Unemployment much better than anticipated 4. 5 . The forecast, 4. 7 . 0. 2s come in and line, month on month. Average Hourly Earnings coming in at 2. 7 . The Market Reaction treasuries with a really strong build. Bit. Yields driving lower by six dennis points. 2. 29 of the u. S. 10year. What does it mean for the dollar . Dollar was stronger, then it rolled over. There was a safety bid in the markets given the events of the last 24 hours. We rolled over by. 2 . Treasuries up. Stocks down. Futures lower by five points on the s p 500. Dow futures this morning down by about 46 points. Coming up, an allstar lineup. The reaction continues with Mohamed Elerian, rick rieder, and gary cohn. From new york city, youre watching bloomberg. Taylor i am taylor riggs in the hewlettpackard enterprise green room. Coming up in the next hour, National Council of economic advisers director, gary cohn. From new york city, for our viewers worldwide, you are watching bloomberg. I am Jonathan Ferro. A downsized surprise on the payrolls report. 98,000 was the print. 180,000 was the median estimate. Unemployment comes in a lot better than anticipated, 4. 5 . The estimate was looking for 4. 7 . Average Hourly Earnings in line, year on year and month on month. The markets capturing the story as following bear in mind, treasuries had a decent did coming into the payrolls number given the strikes overnight. Were still lower three basis point of the 10year. The dollar had a bid this morning then it rolled over. We are unchanged on the deputies to the move on the back of the payrolls report. Stocks futures negative. 60 on the dow. Down seven points in the s p 500. Us, alanll with krueger, and join us, gregory. Co. Gregory . Your anticipation . Interpretation question isgory the wage growth of still disappointing. We are still in an environment where inflation has taken some time to come back. Productivity is still low. The marginal costs or the marginal product of workers is still quite low, but we are starting the transition away from pure employment growth to more wage growth, and that is a positive exotic invited. Alix the question Going Forward will be the weather 98,000, is that mean it is a good number because there is less slack, but that is that distorted by whether . Should we have been at 150,000 . Alan i think it is a good idea to average months. If you are concerned the weather , you can takery the two and that gives you 150,000. We can have the Unemployment Rate declined with job growth around 100,000 given demographics in the u. S. , given the fact Labor Force Participation will face downward pressure because of aging because we have so many baby boomers reaching the retirement age. This report shows that challenge the Trump Administration has of bringing people that have left the labor force back in. It is not what they are just on the margin. Many have adjusted their lives taking care of families. Far too many of the prime age men are on pain medication. Opiate addiction is a big problem. A stronger economy is not going to solve the problem by itself. That needs additional help. David you pointed out the maturity of the cycle. Are there indications in the number that tell you how far we are in the cycle . On the break, youre talking about recount numbers, which were down two months in a row. It could be online, and also Consumer Spending. Alan Consumer Spending certainly has not reflected the increase in Consumer Sentiment people are expressing in polls, and think some of that is political. People view the economy through hearts and eyes and given the ship in the president ial administration, that affected conference, and it probably will not affect the real economy all that much, consumption figures. We also have movement online, which is affecting the number of that israde workers one sector what we have nothing much of a rising work hours. It is also affecting vacancies in shopping malls and things like that. I think that trend will continue. Jonathan the initial Market Reaction treasuries get a bigger bid and yields rollover. We have stated that on the marginal little bit. Is your message for a market despite this morning that for the fed it is actually worse . Alan i think the fed will not be surprised by this report. I think if i put on Janet Yellens glasses, she has, i much, been weighing how there, and if is it is eroding, you would expect to see wages growing more and labor force sufficient to stabilize. That is what this report suggests. These numbers are noisy, not because they are fake, but because we do not give enough money to the bureau of labor statistics to do a bigger survey. Jonathan that is a new one. There is the law when it comes to the sample size you want more precise data, of laboure bureau implement. Avid of one hundred percent full employment for economists. Alan data collectors. What these numbers indicate and the size of growth we have seen projections that these might be soft. Do they tell us anything about underlying growth in the economy . Gregory there is a difference, a dichotomy between soft data and hard data. We have soft data that has been quite strong. A large part of that is based on what alan krueger was saying we have elevated expectations, and expectations are a doubleedged sword. If you meet those in terms of infrastructure spending, tax cuts, deregulation, that is positive for the economy. If you focus more on a trade protectionism approach, antiimmigration approach, there is uncertainty, Economic Growth will remain in the modest 2 trend. In your view, it is a function of what is expected on a fiscal stimulus. Gregory there are elevated expectations. Business people generally look for real news in terms of tax cuts, policy changes. They dont bank on promises. That is really what we are saying. In terms of the latest number, theres a lot of volatility in the payrolls number. What is encouraging as we have seen a reduction in the amount of slack in the labor market. Affect the Unemployment Rate continues to fall, underemployment continues to fall those are good indicators when it comes to the overall state of the labor market. Alix what happens to the white house . How do they spin this . You have unemployment nearly the lowest in a decade, and the smallest increase in jobs since may, 2016. The average public will not want to get into the details of the labor market and whether issues. What is the spin over the next 24 hours . Alan i have no idea how they will spin it. Alix how would you spend it . Alan i would do analysis, and i think they need to rethink how they will solve the policy face. In a waymy is evolving one would have expected we will not magically jump to 3 , 4 growth. Alix but 4. 5 is great. Alan the Unemployment Rate, which i do not think is an unrealistic or fake number in any way, it is the best indicator of how the economy is doing. You want to look at a portfolio of indicators. It suggest market is getting to a healthy point. It could get stronger. I think that would help those that have been struggling over the last few decades in terms of wheel real wage growth. Solving the problem of Labor Force Participation that will not happen overnight. President trump has said too many people are outside of the labor force. Well, the number increased last month. If you to credit the month before, he should take blame this month. I think that is large a demographic problem. I think there misdiagnosed the problem to some extent and they have not addressed the real problem, which is how do we address the serious challenges, particularly that men face that are out of the labor force and have been out of the labor force for a while. David alan krueger and gregory daco, thank you very much. Alix coming up, an allstar eup of guests continues Mohamed Elerian, rick rieder, gary cohn. Just how hard it is to be a bond trader today. This is bloomberg. Jonathan from new york city, for our viewers worldwide if you are just tuning in, 25 minutes ago, a downside surprise in the payrolls report. Here are the details. 98,000, the print. 180,000 was the median estimate in a bloomberg survey. The previous number revised from 235,000 219,000. Average Hourly Earnings, month on month, year on year in line. The Market Reaction really interesting. Just going to show that the first move is not always the right one. The first moved move look like this. Treasuries well bid. Now we are lower by just three. Bouncing off session lows. 2. 31 the yield on the 10year. Look at the dollar index at we rolled over, and now were up by. 25 . What does it mean for stocks . Lets get the picture up for you. Futures still negative, but only just, by about four points on the s p 500, down by about 0. 7 . Alan krueger said i dont think the markets are reading this right. A big downside surprise on the headline number. Underneath, bubbling away, month on month, as you would expect. David the real question, bad news is good news is this a lower number than expected, but at the same time, alan krueger said this is closer to full implement, which has to be good. News news. Alix and we have not changed the project ability of a rate hike. Is 4. 5 will they go the boe route . Jonathan and drop it aggressively. David they might be finding the debt number is wrong. Jonathan Central Bank Forecasts have not been read. How controversy of . Coming up, how controversy. Coming up, Mohamed Elerian, rick rieder, gary cohn. Futures up, still negative. Of my almost five point in the s p 500. Apiece. 2 from new york, the opening bell coming up, about 30 minutes away. You are watching bloomberg. The lowest in a decade p. M. Markets begin to fade. Syria assuming the assad regime of killing civilians with poison attacks. Russia condemns the act. From new york city, good morning. A warm welcome to bloomberg daybreak. I am Jonathan Ferro alongside david westin and alix steel. Here is the Market Reaction to the payrolls report. Futures softer, down 45 on the dow. Negative four points in the s p 500. We come in by about. 2 . Switch of the board treasuries caught a huge bid after the initial reaction, then we have come back a little bit. 2. 31 is the yield on the u. S. 10year. The euro weaker, the pound weaker, the dollar stronger on the session following an initial bid on the dollar. And we rolled over and came back. Can you came up keep up to speed, alex to a question mark alix steel alix i can. The tomahawks responsible for the bombing of syria they cost about 1. 6 million dollars, and raytheon says it is about 20 of its revenue, and the u. S. Government except 66 of raytheons revenue. Banks are little bit lower. Part of that is yields. Down. R walmart up. Raise from outperform to market perform. They have an increased physical store dominance, new digital prowess, but i should point out retail jobs were down two months in a row. An amazon trend, or were Consumer Spending question we will talk about that later in the show. David important question. We want to go to washington and our colleague, michael mckee, to go over jobs numbers that came out 31 minutes ago. It is a conundrum on the one hand, you have 98,000, which was much lower than expected. On the other hand, the Unemployment Rate goes down. Question you square those two. Michael you really cannot we might not get to the 200,000 kind of hiring we have seen for a number of years because the labor force is getting tighter and we see that in the Household Survey numbers because the never shows an employment falling to the lowest since may of 2007. We had 145,000 people come into the labor force, which you would think would have the opposite effect, but hiring was really strong in the Household Survey. Fewer0 people, 326,000 lost their jobs. You had the big drop in unemployment. Is going to the fed look at. That is what they were expecting to happen. Again a planned would fall as hiring continues. That should put upper upward pressure on wages. Holden, wages should rise. Paid no attention to the man behind the trading screen. This is probably a negative for bonds. What has been added to the workforce what were the sectors added to that. Michael basically, the numbers were flat along the whole line of jobs, except for, as alix mentioned, retail, and in detail. We saw car sales fall. It will be testing to see if retailers are ahead of the game because theyre starting to let people go as they see softening in spending, or if it is seasonal adjusting. Some mystery still in the numbers that we will see unveiled as we go along. Jonathan june this is Bloomberg View columnist Mohamed Elerian from irvine, california. Your initial reaction to the numbers, please. Mohamed yes, it was a miss on job creation, but be careful i would not extrapolate this to say it is a week jobs report. If you look threemonth average, we are at 178,000. We will probably settle at about 150,000 eventually, and way growth was as expected. This tells you the economy is gradually transitioning from job creation to higher wages, and i think it is in line with the very gradual covering that we have experienced for a number of years now. Chairan if you are fed janet yellen, how do you look at these numbers this morning . Mohamed at first sight, it constitutes my life because i did not get an unambiguous signal one way or the other, but as i go through the details of the jobs report, it would not change very much. It would encourage me to continue the slow and measured orderly transition from following markets to leading markets, and talking about normalizing not just Interest Rate, but also the Balance Sheet. David lets talk about alix lets talk about what the fed and the markets looked at. Michael it is the kind of number that will please janet yellen along with the other numbers on her dashboard the number of people working parttime fell. Length of an opponent fell. Labor market is performing reasonably well, and about as the fed would like to see it. It probably means we stand line for another rate increase in june. Alix Mohamed Elerian, do you agree . Q2 rate hikes in the cards . Mohamed i think you get two more this year, and to the extent there is a balance of risks, the market will involve to the notion that we get more than two rather than less than two. David when you look at the yearoveryear Hourly Earnings increase, two points are percent, at what point does that morningstar start to express in the economy, given where inflation is. It is not real dollars, the when do we start to see in a consumerdriven economy, a real pickup . Mohamed it will be slow, and one important element related to your question is this implement report wants us not to extrapolate too quickly from the much better sentiment data. Yes, sentiment is much better, but the hard data is going to respond slowly. I think youre going to see this morning getting to the economy. More important is what you see with Corporate Cash. That is also very important. You need Corporate Cash to go into productive activities, and acksjust into by buy b and higher dividends. Market participants wanting you have been out front do you get a market that starts to question policy continuity in the following mightthat the fed chair not be the fed chair at the start of 2018. Then you have this murky issue of Balance Sheet normalization and rate hikes stopping. Mohamed there is a lot of uncertainty. To ou say, we may have two four, potentially, new appointments at the board. We have a vacancy, also, now, in richmond. Yes, there will be lots of changes. Yes, there are question marks about the sequencing of Balance Sheet normalization versus Interest Rate normalization. Lots and lots of uncertainty. Having said that, i think the fed will be clear with us, which is solidify your expectations for two rate hikes. I think we will guide the balance of risks to be on the upside, not the downside, and will get more detail on the Balance Sheet. Yet, there will be uncertainty with the appointments. Alix clarity, now you are really stretching. Say we do get the clarity you are looking for 2. 3 of the 10year. Bond bears cannot win. When do they start to . Will conviction turn . Mohamed the technicals we have talked about this before the technicals in the bond market have been such that you have had a scramble to cover shorts. The market was completely offside. Most people expected the yield widening to happen immediately, and they were positioned for that. What we have seen is people scrambling. Look at what happened in response to the syria strikes. Quickly, market quebec but they you came back quickly, but the yield came back quickly, but the yield did not come back as quickly. David put yourself in gary cohns position. Shortly. Nterview him if you are the white house and you look at the numbers, how do you react . Does this tell you on the one hand i had better be careful about fiscal stimulus because we have wage pressure, job title, or does it say i need to redouble my efforts . Mohamed it tells me i need to redouble my efforts on structural engines of growth for the u. S. Economy. That i cannot do it just cyclically. I need to act structurally as well. That is why if a structure is important, tax reform is important to a few other important. A few other elements are important at reducing potential growth. I would take this message back to congress and say we need to get serious on structural drivers of growth, and therefore serious on tax reform, infrastructure deregulation, and i would add labor retraining, education reform, and a list of other things. The other side of the equation the other part of the mandate, inflation. 2. 4 will not be an inflationary yearoveryear wage gain. If Energy Prices continue to drop back or hold study, were not going to get to 2 . Does that still justify the fed doing as many as four rate moves this year, as you suggested . Mohamed i suggested three with a balance of risk being higher. In terms of inflation, it is not going the feds way. Expectations have come down. This into what was told to us last week the fed is also looking at asset prices and the notion of rich asset prices. The number, financial conditions have loosened, even though the fed has been tightening. That is an important consideration. Netthat, i think they will reaffirm two more hikes, and that will guide us slowly to a balance of risk on the upside. Jonathan you have another and sticking with us. And michael mckee, thank you very much. Coming up, much more reaction to the march payrolls report with gary cohn and rick rieder. From new york city, counting you down to the market open, about 19 minutes away, futures off the lows. S p 500 futures negative one. Reaction off the back of the payrolls report. From new york, you are watching bloomberg. The number 98,000 jobs added in march. On implement rate, 4. 5 . Still with us, common elerian, and join us, rick rieder. Your take on the number . It was softer than anticipated, but the having said, a lot of things, including the household number was pretty softer solid. There are a couple of things to watch one of the things i watch carefully is the recount number was soft. We have to keep an eye on that. Some of that is we are Closing Stores the heart infrastructure. One of the things that i have been very encouraged by, manufacturing instruction construction has been solid. Not as solid this time, we had a big number last month. I am pretty encouraged. This does not change the feds trajectory. The economy is growing at a decent level. Alix it doesnt also change the fact that being a bond there really hurts you right now. Rick correct. Alix we talked about that when do they wind up winning when, as you said, overall it is good . Rick a few things, first, you have to respect the events overnight, a flight to quality. It is not just what happens to the fed, the u. S. Economy, but you also have the ecb slow, and the bank of japan. The flood of money, this time of year, particularly with the ecb slower, keeps flooding in. You have to take a bit more Interest Rate risk into the dynamic where the uncertainty is higher, and with other Central Banks being slow, rates will stay in this range for a bit of time. Jonathan at this point, would you have to be pretty out there and aggressive to carry on stating the reflation trade . Mohamed yeah, i think so, in terms of the bond market, and rick raises a really important point, which is so far europe has had a dampening effect on u. S. Yields, but europe itself faces a difficult policy question, which is what should forwardguidedg all the way to december, and the economy is somewhat stronger than it expected. It is going to be interesting dynamics in terms of the u. S. Stage,rket, but at this i would be careful going along the bond market. Jonathan at this point, the market and the curve i dont want to make too much of it because we had a different reaction 45 minutes ago. Lower,at the front and at the backend, unchanged. What you take out of that . Rick the yield curve is extremely flat. Starts typing, you get a flattening of the yield curve. You see a little bit of steepening out Going Forward. Is funny when people traditionally say what is the bond market telling you what is the shape of the curve telling you it tells you there is a huge amount of demand for anything with yield, and that is what is playing out today, particularly when you have more volatility in the system. I dont think you can underestimate the technical condition of the bond market. Rates are going to go higher. It takes a long time because technicals are extraordinary, and the timing is challenged in terms of what Mohamed Elerian said when can the ecb move, when can the bank of japan move . You have a significant technical at play. David the long end of the yield curve is not moving up. Is that because of things like ecb, and how low they are, or increasing skepticism about fiscal reform back here at home . Mohamed i think it is both, but i will put more weight on the first one than the second one. The ecb is in a really tough position. You have to remember exactly what rick said there is a huge demand for long dated exposure. Lots of people need to cover their liabilities, and they will come to the u. S. Given rate differential. That is an influence. On the u. S. Impact itself, i think the Health Care Setback for the Trump Administration raises questions about the outlook for tax reform and other progrowth elements of his program. That has had an influence. At the long end, the european influence in the japanese influence has been notable. Alix to that point, health care issues, tips were the trade. Dlach saying weun would ease back. What do you think now . Summer, then the fall, we were pricing inflation at about 1 with a risk of deflation. The system now, we talk about a 2. 7 average Hourly Earnings. That is a good number when you talk about core cpi above 2 . The inflation market has been unit above 2 now. It has priced in an awful lot. The basic facts, you will see numbers that will start sliding down. With it we have reduced a fair amount. The tips market did its job, and we still think you are in Everyone Wants to say we are in a reflationary dynamic. It is a big deal. 1 reflation with a risk of deflation. Now you are in 2 , but the markets have priced it fair today. It is a good part of the portfolio, but it has to be lower. They are not cheap anymore inflation in the tips market is deathly not cheap anymore. Alix how do you want to capture the reflation trade when it is overpriced . Rick a couple of things that be careful about your duration, interestrate exposure. We elect to buy assets that roll down the yield curve. Make sure you are not taking to too much risk. We have taken more because of the technicals of on the market, but where do you own your fixed income. Be more flexible about where you do it. Emerging markets are priced reasonably. They benefit from a stable inflation, stable growth environment. Em is pretty cheap. Jonathan preview by south africa this morning . Rick we have a little bit of south africa, but we are more possible with places like brazil, india, mexico. Jonathan for a pass investor, when this passive investor, when , country is downgraded to junk for the active investor, does it provide opportunity question mark opportunity . Rick it does, but you have to be thoughtful about when you add, and when you get the flow of selling that has to take place. David muhammad ali rina rick rieder will both be sticking with us, and rick rieder will both be sticking with us. Coming up, gary cohn will be jonas for a fresh reaction to the march jobs report. Live from new york and washington, this is bloomberg. David this is bloomberg. Im david westin. Still with us, Mohamed Elerian and rick rieder of blackrock. I want to come back to the ecb. You raise it as an import factor and look at the u. S. Bond market. Ecbad a statement from the this week, take a look at what they have been up to, and compared to what the fed is doing. On the one hand, the fed says we are on track and want to keep raising. The ecb says not so fast. That is simplified. Why the differences is it looking at the data in different ways . Mohamed is it different in three things, david one is the growth dynamics. Two, political uncertainty. And just as important, there is much more differentiation among the members of the eurozone. The most intriguing thing for me is that if it is not careful, the ecb may end up pressing on both the accelerator and the break at the same time, continuing with monthly purchases of 60 billion until of december, but feeling inclined that maybe they should Start Talking about higher rates, and that will be an interesting configuration if they end up there. David and why would they do that . Does that give them better tools to adjust . Mohamed because they will find themselves in a rather tight situation whereby the data, and as long as Marine Le Pen does not win the french election, but politics suggest they should be less stimulative, but they have Forward Guidance until the end of december, and some would say dont risk our credibility. Be careful. Nobody wants to drive a car with the accelerator and the brake at the same time, in ecb will have to find themselves a way out of this potential situation. David rick, do you see this as a potential situation, and if so, were they wrong to get Forward Guidance that went out that far . Rick i think one of the things markets look for is predict if you are printable, and say this is the plan, that is indigo. There is a fascinating time, as muhammad ali alluded to. You have the french election, the german election, and core inflation is still running around one, so they do not need to be in a rush. As you get into the second half of the year, you talk about the composite rate itll be hard to pull back on the qe program. Up,start moving the rate suck talk about 2018, reducing the size of it, will be in a good position. Right now, there is no emergency, particularly in front of two big elections. Jonathan muhammad ali and, 10 years in germany, 30 basis points. Are we headed toward the bunde tantrum later this year . Mohamed i dont think it is a tantrum. I think we will continue to reprice the market, but i do not think you will get a tantrum as such. Jonathan appreciate your time, Bloomberg View columnist Mohamed Elerian. Rick rieder of blackrock will be sticking with us. The market open four minutes away. Lets get you up to speed big downside surprise on the payrolls. Down point caps on on the down. Down. 10 on the dow. This is bloomberg. Attention homeowners age sixtytwo and older. One reverse mortgage has a great way for you to live a better retirement. Its called a reverse mortgage. Call rfree information kityour with no obligation. It answers questions like. How a reverse mortgage works, how much you qualify for, the ways to receive your money and more. Plus, when you call now, youll get this magnifier with led light absolutely free when you call the experts at one reverse mortgage today youll learn the benefits of a governmentinsured reverse mortgage. It will eliminate your monthly mortgage payments and give you taxfree cash from the equity in your home. And heres the best part. You still own yohome. Call now take control of your retirement today jon from new york city, you are watching bloomberg daybreak. Moments away from the opening bell. 98,000. Surprise the expectation was 180,000. The risk off move has been fading in the last hour or so. Down two points on the s p 500. The dollar is now stronger. It was weaker just after the jobs figure was released, now up. 25 . We are looking at a bit of a softer open in the u. S. Overnight, the low for dow futures was down 143 and down 17 for the s p on the u. S. Strikes in syria. In individual names, you have to look at the fence stocks. Lockheed martin, general dynamics, all oup. Aerospace Defense Group up 7 this year. U. S. Wind up using more . One potential weakness we want to talk about ar construction jobse. 6000 theup slowest in six months. Civilue line is engineering construction. The white line is all other construction. Also relatively rolling over. Is that a weakness in the overall economy . K rick rieder. Scott baue rick the Housing Market is in pretty good shape. There is one major drag. You cannot talk about housing without being in concert with whats happening to the student loan dynamic. Bill dudley talked about it in the recent presentation he gave. 70 of the Housing Markets are firsttime homebuyers. Thats 36 years and under. About half of them have Student Loan Debt. You are creating this incredible drag on what could be a better Housing Market than we have today. David this comes to us from Federal Reserve members. The yellow line is the Student Loan Debt. The blue is auto that. Auto debt what strikes me is not just how high it is, the Student Loan Debt back in 2003 with 300 billion. 1. 3 trillion this time. A much steeper climb than everything else. Rick that is a thing that people dont focus on because it gets directly into how do you you have a demographic now that you are seeing household formation with a natural transition of how young people build wealth. They are stifled today because of the burden of extraordinary Student Loan Debt. The study showed that 70 of the people when asked why they cant make a down payment, they referred to their Student Loan Debt. The answer is and we just forgive all the debt. You have to see fiscal policy that addresses this. David maybe not forgive which weve talked about in the last election. Restructuring the debt to relieve the burden. We are not just for giving it. Rick i spend too many hours on it there are ways to do it. If you can take that Student Loan Debt and transition it into firsttime homebuyer debt and create an incentive for some cost andake become a firsttime homebuyer, theres 3. 2 jobs created for every house built. Let people pay down the Student Loan Debt over a longer time as long as they become firsttime homebuyers. Solution be an elegant with real velocity. A real multiplier to the Housing Market. Consumptionlly struggling over the next few years because the debt is such a burden. Jon if you dont get the Younger Age Group to spend, if you get this demographic shift where the baby boomers to retire, wheres the consumption coming from . How big of a drag on growth will this ultimately be . Rick a lot of questions in that. Theres a bunch of things to think about. Demographic, the aging population does create a dynamic that is real. It is playing out. Youre healthier part of the economy in terms of what stimulates growth is that 2540yearold that gets into the dynamicin around what really drives consumption. This is not a subprime crisis. Ae government backs up tremendous amount of the debt. It is a tangible drag. We cannot grow at the rate we would grow at. Jon how do you put money to work . Rick theres a few things to think about. We think Interest Rates can move higher. It will be really slow. Re you own your income places like nonagency mortgages. They are incredibly attractive at these levels. Part of this argument in terms of the markets. You keep rolling down the yield curve. We think the economy is pretty strong. The Unemployment Rate is an incredible number. Inflation is not going to get away from the fed. It is where you own your interestrate exposure that will be big. How do you make 46 return in fixed income . Think about what the highyield market has done. You see tremendous inflows into that market is because it gets you a six personyearold 6 yield. Diversify where you get your fixed income and you can still throw off 46 return. Alix the default cycle is going to pick up. That is what i heard last fall. Has that been pushed off . Rick what inning are we in the credit cycle . I think we are in the eighth inning but we are going extra innings. Something amazing has happened that weve never seen before. The majority wall has been pushed out in terms of repayment in the highyield market. Companies have refinanced their debt at incredibly low Interest Rate levels. You dont get choked by that leverage for a long peirod of time. Period of time. You wont have a default cycle for an extended period of time. Only where technology aggregates the cash flow. You saw that in retail and energy last year. David talk about autos. A really dramatic ramp up of autos. Rick i disagree with that these is that they can keep rates low as volume it gets into the Financial System. Part of why you are hearing that the and others talk about financial crisis. What is happening to auto finance . Easier conditions, leverage build. It is a big deal. Something i dont think as a free lunch. Youing has a target keep rates too low, you put leverage on getting there. Thats where the financing is getting put. Jon what does it mean . Rick it is different from subprime housing. Default rates stay much lower ca, people tend to need their car. That is muchnamic more fluid in terms of the auto market. A smaller consumption item. Weve reduced a good deal of our subprime auto exposure. It wont create anywhere near the stress the subprime finance that. The spreads are two tight. Too tight. Jon rick rieder, you are sticking with us. Nine minutes into the session. A session that looks like this. We are up 28 points on the dow. The initial kneejerk risk off move faded. Yields still lower. Some Dollar Strength in the fx market this morning. From new york, youre watching bloomberg. Taylor coming up, gary cohn joins us for a fresh reaction to the march jobs report. Alix in the bond market, one of the biggest movers has to do with south africa. Also localjunk currency debt. This is the Market Reaction. You can see the jump in yields that we saw on that. One, too much risk. The situation might not be as bad Going Forward. , you are tentatively buying south africa this morning. There willrica be a time to buy south africa. The political situation is difficult to ascertain at this point. If you can pick up 9 plus yield in brazil and you know when inflation is coming down, you are getting an awful lot of the sevensexico in i would rather take that risk at this point. Brazil, argentina and mexico, thats where clients are they are interested. Rick we were starting to see it and then the president ial election, it stopped. More discussion about walls and trade. E. M. And puthind that into equities. Still, people have not gotten their exposure to where it normally would be because theres concern about trade. David theres Political Risk associated with mexico and brazil. In isu factor that it fully priced in . Rick it has to be one of there are a series of metrics we look at and evaluate where you go into a country or a company. That is a big one. In emerging markets particularly. You saw that play out in argentina four years. For years. You have to be focused on the politics. You have to give south africa a bit of time. Does trade fit into your analysis . Think the discussion about the trade deficit coming into the media as this extraordinary dynamic about how much its going to go down and he overstates it. Look at some of the names on border adjustment, markets overdid it. We like the currency and rate in mexico because theres so much focus on how big the wall is going to be. At the end of the day, their dropped the currency 50 . It got overdone. When it gets overstated, we look at the numbers and see where the trade mexico is not a big problem for the u. S. China is an issue. Keep an eye on the meetings at maralago. Jon how much of the e. M. Risk was about china . Rick massive. People underestimate china last year was 42 of growth in the world. Ins virtually all the growth aluminum, copper, iron ore and when china said they would grow and not reform, thats when the markets changed. Commodity prices stabilized. China is a huge deal. Thats why the discussions in florida are tremendously important. At what is more important e this point . The topdown favorable thing with the dollar or ultimately whats going to happen with china . Is theo doubt, china driver of there is such a big influence on growth in trade. The influence on the emerging markets, e. M. Asia and let america, china is a big deal. E. M. M. Asia and latin america, china is a big deal. It is that balance of what is the shark closest to the boat, what do i have to deal with today . And then the elections in france. The bigger driver is china is just huge in terms of influence. Alix is the play going to be the regional dynamics in asia to insulate yourself from the issues in europe . Rick i think you can feel comfortable today and that chinas growth will be pretty good for a period of time. We were comfortable taking some risk in asia, whether it is of for taking a bit whether it is credit, taking a bit of risk. European rates are crazy high. They are not going anywhere until draghi starts being more aggressive after the german election. We like being shorter in european rates. We like taking risk in asia and emerging markets. Rateslaces are reducing and european rates will be higher for longer. Alix great stuff. Blackrock. Of check out tv. Our e. M. Conversation with rick rieder on tv on your terminal. This is bloomberg. Jon from new york city, you were watching bloomberg you are watching bloomberg. 98,000, a huge downside surprise. 180,000 was the forecast. Unemployment came in at 4. 5 . Downside negative surprise on the headline number, but unemployment looks good. 21 minutes into the session. Equities a little higher on the up by a single point on the s p 500. Yields lower by four basis points. 231 is the yield on the 10 year. David we are joined by the quarterback of President Trumps economic team, gary cohn. Welcome to the program. We have some jobs numbers here. What is your reaction and what is his reaction . Gary i definitely had an opportunity to talk to the president. We are pretty pleased with the jobs numbers. When you look at the on up limit numbers going down the unemployment numbers going down u6 six number coming number may down. 3 . Being greetedobs by companies weve talked to an moving manufacturing back to the United States, we are very excited about whats going on in the future. David the president has talked about the underemployed. Is that one of the most important things you and the president will look at as you get this report card every month . Gary absolutely. We spent a lot of time talking about the u6 number. The people we think are working in jobs that they could work at a better job it was out there for them. That number coming down by. 3 is very exciting for us. We are happy to see that number below 9 . We would like to get that number lower. Exactly what the you and the president think you can do to address the number . What are the specific initiatives that will have the most effect . Fiscal policy, tax reform, regulation . Gary yes to all of the above. We started down a multiple track system first of all, deregulation. Some we can do through personnel by putting new personnel into some of the jobs. We can deregulate some of our industries. Youve seen them come through executive orders and by some of the agencies. We are also working on tax reform. We think it will have a big impact on job creation. The president is doing this every day, meeting with Corporate Leaders around the told, having them committed bringing jobs back to america as we are bringing more and more jobs back to america. We will continue to increase the job opportunities. We also need to go through training. Eugene the president spend a lot of time talking about retraining our labor force you have seen of president spend a lot time talking about retraining our labor force. We have a lot of jobs out there that need to be filled. Training our applicant pool to fill those jobs, we can do that very quickly. Initiatingwere just canw of deregulation you give us an update on where that stands and what we can expect and when . Gary we are starting down that path. Weve been in office for just over 10 weeks now. You are starting to see a bunch of our personal appointments. Got three fed governors to appoint. You will see some appointments come out in the very near future. We are very excited about those appointments. That will help us with the deregulation of banks. We talked about small and mediumsized lending and that is important to us. We know that small and mediumsized businesses are the real job creators in this country and we need to get banks lending to small and Mediumsized Companies. Weve met with small and mediumsized banks and they are talking to us about the issues they have with lending and getting small and mediumsized banks lending again to grow the economy and grow jobs is very important to us. David theyre been reports that you are open to the possibility of reinstituting some form of glasssteagall. Can you connect that with what youve just said . Gary the president during his modernn talked about a 21st century glasssteagall. I was asked about that at the Senate Banking committee and i talked about the president s policy of having a new, modern, 21st century glasssteagall. More does that help get lending to small and Mediumsized Companies . Gary we would like to get banks lending again. We are worried about the onesizefitsall regulation. Right now, we have this massive set of regulations bill to regulate all banks as equal. If we come up with a 21st century, modern glasssteagall, we may be able to tailor regulation for different aspects of the Financial Markets and financial institutions. That would allow banks to get lending more aggressively to small and Mediumsized Companies. David finally, youve mentioned tax reform. Yesterday, we interviewed senator john thing. Senator john thune when will we have meaningful tax reform through the congress . Gary we are spending an enormous am out of time on taxes right now. My number one agenda item right now is taxes. Enormous amount of time. We will launch one cohesive plan together. I dont know if it is august or not. Getting it done well in getting it done right is more important than getting it done soon. We are committed to getting it done this calendar year. You will see much more out of us on taxes when the Congress Comes back from the recess. We have a lot of important meetings scheduled with congressional leaders in the beginning of next month. Sunny glad to see it is this time. Thanks, gary. Jon they want it done in the calendar year. Out august. In threw rick august is an incredibly important time. To get before the august recess, to get things done thats why delaying aca is a tricky dynamic. People Start Talking about midterm elections again. I think the markets will focus august is a really big deal. You are making progress and you can get things done through the august recess. It is extremely hard. Jon great to have you with us on the program. Thank you very much. 29 minutes into the session. Douw. Ve 40 points on the 80s and bid on treasuries all morning. A decent bid on treasuries all morning. From new york, you are watching bloomberg. Nejra this is bloomberg markets. Vonnie lets get a check on the markets Abigail Doolittle is here with an update. Abigail a bit of a risk off dow, s p 500 and nasdaq trading modestly lower after some volatility. Investors are digesting that weaker than expected jobs report and the syrian missile attack. We see the volatility, this goes all the way back to the end of our day yesterday right around the time of the syria attack. Futures dropped off significantly, then climbed, regained ground, slightly positive briefly before the payroll support and then another drop