You. Futures are up after closing at a record high. Treasuries are up despite decent data. 221 is your yield on the 10 year. Up, jobs friday in the trade balance for april. Philadelphia fed president talks on the economy. Robert kaplan takes questions and luncheon in texas. Baker hughes rig count, we are looking at oil, its getting hammered. Its going to be brutal to watch that cap. David President Trump has decided to withdraw from the paris accords. The reaction worldwide was immediate, even from prominent ceos who turned to the president s favorite means of munication. Climate changeed is real, leaving paris is not good. Bob eiger followed soon after. He resigned from the president s council. Thehead of Goldman Sachs cited to send his first tweet ever. He said its a setback for the environment and the leadership position in the world. Saidbenioff of salesforce he was deeply disappointed by the decision to withdraw. We will double our efforts to fight fight crime it change. Lets start with you. How you react . It was anticipated that was going to happen. Its a shock to the world. We saw the letters coming from the leaders in france and germany and italy. Britains may could not react to it. It looks like a major mistake. Hasnt somebody explained to the president that he is unable to ,mpact a world price of coal oil, or steel. Why would that necessarily generate jobs . Its an opportunity for them to change Tech Knowledge he. The reasoning doesnt make any sense. The world price of oil is set in the world, not by the president of United States. The opposition is unsurprising and probably sensible. David if the economics dictate what happens, why does it matter . In the next 24 months its not going to make a lot of difference. It does affect the political discourse here. The longterm, these are important issues. In the short run, i dont think it makes a big difference one way or the other. Anathan you just made marketbased argument that reminded me of the 1980s. It reminded me of Margaret Thatcher. Danny i been thinking a lot about china. Look at what happened in china. They are taking leads in solar. Mayor bloomberg from this organization, we see china closing coal plants all the time. The Global Demand is in decline. This is what its going to impact the market. The chance of the president of the night states is going to bring jobs back to coal is nonstarter. Its not credible. When you base the decision on noncredible arguments, you dont understand markets. Nothing much is going to happen for a year or so. The rationale behind this makes no sense. Maybe it makes political sense. , you the coal mining jobs mentioned china. Come inside the bloomberg. On the left you have the u. S. The Clean Energy Plants in the area, the yellow dots are solar and the green are biomass. China is way ahead of what we have seen in solar then the u. S. Do we see business money start suit out of the United States into china . Jim china is a big growth heart of the world. Its the emerging market economy where their numbers are up 7 on gdp. Our potential growth rate is about 2 or so. Thats the general shift of the world anyway. Is any of this going to change those numbers . That is a heavily subsidized industry in china from Central Government. Thats why d. C. Does matter. If you want to compete in green energy, you need the government subsidies. Danny i have friends in the u. K. Who have moved to work in germany to run solar. Germany is leading. Down the road, this is a sector thats going to grow. Meant thee decision u. S. Is going to be a follower. David lets talk about private sector. Mckee tong in mike talk about that. Either through private initiatives acting on their own or through states and other municipalities, will that negate the effect of this . Mike it will. We are seeing states and cities adopting stringent environmental regulations. We see it in new york where the buses run on natural gas and the taxes are being converted to highenergy fleets. You see this in practice already. Have noted,anny mayor bloomberg has written a book that suggests we can reach the targets without federal government cooperation. You can see what its happening. The president based his argument on one study that has been criticized as extremely flawed, that we would lose 2. 7 million jobs by 2025. The problem with that study is it did not account for jobs that would be created i these new industries looking for environmental relief. The coal industry has been losing jobs for years and years as the price of natural gas is gone down. Rapidlydustries are gaining jobs. There are more people working in solar than coal. Innovation is going to be creating jobs. Thats the flaw in the argument. Alix you cant compete with three dollar natural gas. Do you think it has the effect of more Capital Spending here in the u. S. . We been waiting for pickup. Will Companies Say i am going to put money in this area . Jim the numbers are small compared to the overall economy. The Business Investment part accelerated. I would not expect any of this to make or break the macro economy. Individually, it can make a big difference. Jonathan looking in american business, its hard to reconcile this is bad for business. Have we got an idea of the central argument at this point . Mike other than this one flawed study, general reaction seems to be this is opportunity lost in new jobs would be created and new firms created. Weakene manufacturing, provide the material people means. Prices have come down and people are starting to use more solar panels. That is helping manufacturing and that injury. That is the dynamic you get in an economy that is going to be cut off. Made the point, this is going to take some time to show up in the economy. It may never. Under the rules the president is adopting, it doesnt happen for another three years. He could change his mind and we could see new politicians come along and put us back into this agreement. Jonathan i cant believe the climate has brought danny and Margaret Thatcher together. Danny its an honorable estate area estate. We have seen the mayor of pittsburgh who was mentioned the president immediately come out and say not in my place. Its not just ceos, states and locals who can have a say as well. Im a market guy. The market will work. What can you do to change the world rice . You cant. Markets respond to relative prices. I will try to explain it if you like. Alix it all revolves around oil. Sea has beenrth neutral. They cant produce oil. Alix Michael Mckee, thank you very much. Coming up, we have an interview with David Einhorn it. Shareholders meet on his plan to get the price up. He will explain what he thinks would work. We will get the National Economic Council Director right here on bloomberg. Alix here are the figures stacked up on the bloomberg. We are looking for 182,000 jobs. It will be below the fed forecast. Hourly Earnings Growth may have slipped back. The u. S. O preview is economist. What are you looking for . Carl the focus today is going to be on the Unemployment Rate. Thats the new information. Most likely the economy is plotting along at 2 pace. Payroll gain should be in the vicinity of what weve seen in the moving averages, in line with the consensus forecast. With the Unemployment Rate in that post recession low of 4. 4 , lower than estimates for this year as well is longer run neutral estimates, thats the moving piece here. The consensus is looking for that to hold steady. Any further decline is going to really send shivers down policymakers spines, but maybe policy is offsides as the economy starts to face labor shortages. Alix no one cares about that. Its wages. What do we expect on the wage front that is going to beget enough to change the cycle after june . Carl they track at the end of the day. I dont know there is a decisive story in one that is not reflected in the other. They are both moving in the direction, showing a significant slack in the labor market. Getting back to unemployment, that ties into this wage pressure story. It goes back to the phillips curve. When the Unemployment Rate is low, we should see more wage pressure. I dont know we see that in todays report. We should start to see the pressure intensify later this noted there is increasing labor shortages and employers are biting the bullet so to speak and paying higher wages to attract talent to fill those vacancies. David the spread can vary. I want to throw a chart on here. This shows the spread between the highest point since 1995. Is this a problem . People may not be happy with their jobs. Carl it speaks to that point. The spread it tends to widen during economic weakness. We can see the gap is starting to narrow. The biggest factor differentiating the official rate and the you six rate are the parttime workers. The are not employed at level they wouldnt prefer to be. They have a sense they have not reached their optimal employment status. Jonathan its great to have you with us. Still with us is lets start with you. This time last year was interesting. Jim i think there are some risks in that direction. You are referring to the report that came in at 38,000 on payroll. It turned out to be a misleading sick. Bunkley numbers are volatile. Seasonal adjustment is challenging. May is challenging. I see some of the same risks this year. I agree the trend in growth is solid. 180,000 plus per month is the trend. That means the rate will come down. I do see some parallels with the year ago number. I do think there are Downside Risks or technical reasons. Yearhan i was told last that what mattered was the wages and the jobs growth would slow because we were near full employment. They havent slowed. Here we are year later. Have 180 or 182. They are going to slow soon. Danny people who think the employee is it full employment dont understand the labor market and the Unemployment Rate gives you a misread of where we are. David is right. Returned. Not the number you should look at is the employment rate. If you look at every other country in the world, its the mirror image of the unemployed if you look at the employer 3 below itst is starting point in 2008. That gives you 8 million jobs from full employment. This point. Jobs at if it was true that the rate told us about fulham ointment, rage growth wage growth should be for and its too. I would like to go back are present. Belts statesust saying jobs jobs jobs. How come the election was spot on jobs . The Unemployment Rate makes you feel like a bum steer. That gives you a number of around 8 million from full employment. Jonathan lets say it was around 4. 5 are in you would have to go. Would you tell them . And halfe first year the bank of england i argued there was going to be a wage explosion in 2007. It was a nonstarter. I talked to the head of the tec. Everyone says there is going to be a wage explosion. He said i have no targeting power. In this Global Economy were going to be able to raise wages. Raise wages, and employers can move to china and elsewhere. People have not understood the labor market. The election was thought on jobs. What weve heard as we are it full employment. Thats why wages are very low. We are probably near 3 . Not been saying wages are going to rise. Its turned out. David there you have it. Danny will be staying with us. We have an exclusive interview with David Einhorn. He is a plan to get the gm stock price up and its timely. He will be here exclusively live from new york. This is bloomberg. Alix walmart stock is up over 12 . 14,000 people are gathering for the walmart Shareholder Meeting. They are trying to take on amazon. Emma chandra is there live. Walmart made that announcement about combining ecommerce and brickandmortar. Big ecommerce has been a push for walmart this year, especially since they acquired jet. Com. Founder heads up ecommerce for walnut. Walmart. They have changed delivery options. As you were mentioning, they are trying to leverage their physical assets. They are using that to push click and collect and this new thing they announced, having employees deliver that final mile. Alix everyone has been trying to take on amazon for a while. Whats going to be the new new going on. What do shareholders want to hear about . ; amazon is a big focus, trying to dislodge the prime customer is something investors are going to want to hear about, how that sticky have sticky that prime customers. Its not all about amazon. Amazon does it need to fail for walmart to succeed. Retailers like macys and sears are struggling and that means room for walmart to take market sale share. They are really focusing on improving grocery offerings. That is half their sales. There is a big push for better quality groceries. There is a headwind that is facing walmart and that is the number of european discounters entering the space. Are big price cutters. That could be a problem for walmart. 14,000 shareholders. Danny my son lives in dallas. It took them 42 minutes to get something delivered i amazon. It was a pingpong table. Jonathan bill gross and more from new york. You are watching bloomberg. Jonathan from new york city, you are watching bloomberg daybreak. Im Jonathan Ferro. Before weof gains close on another record high on the s p 500. Higher by a quarter of 1 . Global equities with a really nice tone to them this morning, if you are longer. One hour from payrolls. Yields lower by a single basis point. Remarkable calm in the fx market. That is the story across assets, lets get you up to speed on what is making news outside of the business world. American Business Leaders are firing back at President Trump decision to walk away from the Paris Climate Accord. Goldman sachs Ceo Lloyd Blankfein called the decision in a setback for the environment and for the u. S. Leadership position in the world. Disney ceo bob iger and teslas elon musk said that they were resigning from the president ial jobs panel. Haswhile, President Trump taken the battle over his travel ban to the supreme court. The nine justices will be as to reverse the order that bars people from entering the country from six muslim majority countries. In manila, and attempted robbery , not terrorism, appears to be the reason for a casino attack that left 37 dead. A gunman stormed the World Resorts casino, setting fire, and fled with stolen casino chips. Police say the gunman killed himself and victims appear to die from smoking inhalation. Global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. This is bloomberg. Jonathan european and chinese leaders can or brussels today to sign there ever first joint agreement on trade and Global Warming, displaying the need to fight Climate Change. Trump hours after donald announced his decision to withdraw from the Paris Climate Accord. Ourt would hamstring workers, weaken our sovereignty, impose unacceptable legal risk. There is no risk here to the energy transition, there is no backsliding on the Paris Agreement. He decision of the United States to pull out of the Paris Agreement is utterly regrettable , and that is me choosing very restrained language. It is necessary after the decision from the United States to turn the page. We all share the same responsibility. Make our planet great again. What does isll danny blanchflower, professor of economics. Danny, we have quite a divided. Lobal stage now completely fractured on issues like Climate Change. What are the consequences of that . Obviously, the story that would think is you need allies. See a great fracturing between themselves and the United States, and that clearly cannot be good. We heard that line from macroon clearly macron clearly aimed at the president. It is not lets make America Great again, but lets make the planet great again. Earlier, weu said must do this for businesses, and businesses say you must not do this. There is not just a disconnect between continents but a disconnect between leadership and business. The other thing for business, this is really enhanced uncertainty. Think about brexit. If you are a firm, you have no idea what the wages will be. Goodness me, i will sit on hold. Now you see this arguing between countries and governments. Presumably, this is bad for investment. You would look certain, calm things. The economy is getting hit by all of these huge shocks. Presumably, businessmen are worried about what is going on. You can see policy uncertainty indices at record high levels but also on confidence indices at record high levels. There is a confluence of fact. Happening, confidence very high. A good deal of the policy uncertainty in the United States was how large will the tax cuts be . There has been lots of costly great deal of uncertainty about it, but nothing that rises to the threshold of interrupting economic activity. Jonathan if businesses came out and said they were unhappy with the decision and that transcended sectors from tesla, disney, Goldman Sachs, fine. The Investor Base has been vocal about this as well, pushing companies to go down the direction of the Paris Climate Accord. Stocks close at an alltime high yesterday. How important is it in the short to medium term it equities will continue to go to records . Headlines, oil may go up on this decision, oil may go down, this day to day stuff. There is a story on the side, rising record corporate profits. That is the reason equities are going up. These political issues and there are quite a few elections in the u. K. , possibly in italy, go on and on with these issues. All of these are meaningful but. Ou cannot make that the story the payroll data, what did the American Economy do last month . Its a different story. Danny the one thing you would say would brexit, a lot of people expected quite a slowing of the economy. That did not happen for a while. It looks now that we are starting to see a response, so things take time. Currencies weekend, factories ship more goods, uncertainty. Alix can you also flip it and say that this is a good thing for European Assets . Commerce bank said that you would see more cooperation m between european leaders, so a fractious europe may not be on the card, which is good for money flowing into italy, good for the euro. Can we think about that assumption . Steven we have heard the argument that brexit woke up the continent. It is hard to say that this is good. On a net basis, if you put the u. K. And the eurozone together, this is somehow better than that. Danny i agree with that. If you think about brexit, trump, the big problem, if you in all of these countries, steel towns, cold towns, how are the jobs going to come back . In the u. K. , all of the seaside towns voted for brexit. The reason they are in decline is because people can take a cheap plane and go to the mediterranean. Brexit will not improve that. Natural gas will not be expensive for coal. It wasn i thought interesting when chancellor merkel talked about reliable week, shearlier this did not just talk about the United States, but the u. K. As well. What was interesting was the joint letter signed by the leaders, including the german leader, the french president. Prime minister may did not sign it. Is the u. K. Part of the u. S. In the way that it is fractured on the global scene, is the u. K. On the outside . Are seeing an adjustment. Perhaps i would say yes, two weeks ago, with the labour party behind in the polls. Today we see them two points behind. Things can change fast. Essentially, the election was called to talk about brexit but nobody in the election is talking about brexit. We will see the election outcome next week they will be very big. Will notsible that may get an outright majority, and that all the answers will start again. The brexitalk about on the one hand, the president s decision on paris on the other. A year ago now, think about where the president of the united date was on paris am a what a difference a year has made. Brexit is more likely to be a 100 years phenomenon. We dont know for years from now where the president of the u. S. Will be. To compare these things directly is hard. Is ae and the u. K. Longrunning drama with many chapters. Some of have advantage from time to time. If someone wanted to ask me how important this u. K. Election was , it is a regional, u. K. Issue. How strong the hand is of one versus the other and how they play this out is unclear. Jonathan the populist candidate is not Prime Minister may. Someone one with the policies that you have called crazy and bonkers yourself danny and i was on the team. Jonathan jeremy corbyn. Are they just populist thinking right now . Danny we have seen a degree of populism rising around the world. The people have not been felt they have been represented. Corbyn has put forward populist things. We will lower the price of train tickets, we will lower the price of energy, we will take money from the fatcats and give it to the workers. Whether you think that is sensible or not, it appears to have a populist appeal. Good, as Bernie Sanders draws a big crowd. The Prime Minister cannot and wont. He has a populist message and that is why the polls have moved. He has done the Bernie Sanders. Jonathan would you go back to the team . Danny i have been asked and i said no. I think the argument that you have to go sow the rich you know what im saying. Theare right, but you take point. 80,000 pounds is not a lot of money. Danny blanchflower, Steven Wieting will both stay with us. Coming up, an exclusive interview with David Einhorn. That gm shareholders vote is coming up. His plan to redo the company so they can get. Rice up. Why he thinks that may work and what the objections may be. Live from new york, this is bloomberg. Coming up, an exclusive interview with David Einhorn, president of Greenlight Capital. Alix 45 minutes away from the jobs number, markets extending their highs from yesterday. You have the three major u. S. Indices closing at records yesterday as well. Fundof america is saying inflows reached 7 billion last week, the most in five weeks. Danny blanchflower and Steven Wieting are still with us. What is puzzling, stephen, we have the 10year at 2 , gold hitting a six month low, and oil around 47. How can the rally extend with those factors . 15 , doubleings up digit year. The expectation that we would have an exceptional year, a u. S. Economic boom on tech stimulus has gone away. Big boom,ial for a bust cycle has diminished as well. The rest of the world is moderately accelerating, lots of widespread moderate growth around the World Without big promises of tax cuts. Alix that is the reflation theme that is not baked in on trump but there are other issues, danny, like lower oil, five of the worst pmis in emerging markets. Can you have this much confidence in the reflation trade when you are having those outflows rollover . We were growing but we are not having an exceptional boom, low Interest Rates globally. Absolutelyis recession signal but the fund rate is at one. The difference between the fed funds rate and the 10year is one. Known is talking about a european recession because the ecb is at 40. Danny the u. K. Is now the slowest growing g7 country at a time when there is an election coming. It is not coincidence the polls have moved. We have seen for the first time, 423 or three years, real wages go negative, very slow growth coming at the time of an election. Maybe it is not surprising that people are feeling i just think the worry without stimulus being delivered in the u. S. , things being pushed to the side, perhaps the Downside Risks to things have increased in the last three months. Maybe a delay of fiscal stimulus is a good thing. The economy is doing ok. Maybe when it is really needed, it will be the end of next year going into 2019. Steven you have to go through it first. You do not wish for stimulus to rescue you when you need rescue. If today we decided that we were going to do some major infrastructure stimulus, how long would it take . An awful long time to sort out. Itnk about how long before had an effect on the real economy. People would understand this is coming but if today we voted for a trillion dollars, where is it going to be . David it is not countercyclical. In china, it would not take nearly as long. That is one of the president s objections. They have two strong spending on infrastructure. You have lumpy economic effects because the spending has been so strong, now you have an airport to everywhere. That is the one place where Infrastructure Spending has probably been excessive. There are things you can do. Think of Public Sector projects. Anything that has been cleared, local approval, ok, we will fund it. There are countercyclical things you could start to do. David it was called shovel ready. My expanse around the world is that politicians understand there are things ready to go waiting for money. I remember talking to alex in scotland, David Cameron saying we do not have anything ready, but within three hours, alex could come up with a billion dollars of things. Interesting that we have shifted to the stimulus needs from d. C. Pretty much everyone who comes on to the program says we dont need stimulus from d. C. To keep on grinding at record highs. Danny you have to start now to be ready in three years time. Everyone hates the Unemployment Rate, but look at what the target is our. You have a dramatic improvement in American Labor markets from an incredibly severe low point. An economy growing at capacity very deep into an economic recovery. Is the way to make it better grow rapidly for a short period of time . Arguably that is not the case. Do we have the ability to do this without a severe boom bust cycle . Possibly, but it has to be scaled back. Things on the supply side need doing, but that takes ages. Jonathan we need more time. Alix like we do in the segment, but we are out of that. Steven wieting, danny blanchflower, a pleasure to have you here. You can watch all of the exciting moments on our bloomberg terminal. Relive all of the exciting moments. This is bloomberg. David this is bloomberg. Im david westin. Congress is in recess this week but has a lot on its plate when it gets back to town next week. Senate republicans will be key for anything that happens. Utahor mike lee from serves on various committees, including the judiciary, energy, and armed services. He is also the author of written out of history. Welcome to the program, senator. Fascinating book. It does tell us about people that we may have heard of but have not focused on much. There is a common theme, there attitude toward Central Government when the country was founded. They understand government has a place. The easiest place to keep it accountable was at the state and local level. There were some issues that had to be handled nationally, and that is why we had the constitutional convention. One of the points you make is even alexander hamilton, thought to be a strong federalist, would be shocked about how strong the federal government is today. I mentioned tax reform. Talk about how someone who things we should have less power in washington, how would they approach this today . Would imagine they would push toward simplicity. Complexity in the government is a subsidy to the wealthy and the political establishment. David simplify the tax code, that is something you are in favor of. What about the tax expenditures . We influence peoples behaviors by the credits and adoptions we give. Or you, be in favor of cutting back on tax expenditures . Sen. Lee i would be. There is nothing about the founding generation that would have had to say about that. Their taxis to him was different from ours. A clearfficult to draw line between what they would want the tax go to look like. David lets talk about where you are on tax reform, where you think the congress is headed. Are we going to get to tax reform this year . Sen. Lee i believe we are. I believe the big push will be to lower the rates and broaden the base, to make sure we have a steady stream of revenue coming in, make sure it is progrowth. David does the revenue have to be enough to pay for the cuts . Sen. Lee im not saying it has to be revenue neutral, but i think we should have an aim toward having a dynamically scored revenue neutrality, something approaching that. David you are in the senate, is progress being made . We do not see it on the outside. Scenes, or people moving forward to concrete legislative language that can be voted on . Yes, particularly within the finance committee, in the senate as a whole, a lot being done offline, not much in the public with regards to the Affordable Care act and our efforts to repeal it. The believe is that Health Care Reform has to come first and then tax reform second. David will it go forward with 50 votes or 60 . Sen. Lee 51. We can a compass either using Senate Budget reconciliation. David border adjustment tax, in or out . Sen. Lee the white house does a number in the senate that do not like it. I think it is a horrible idea. David senator mike lee, thank you. Jonathan coming up, an interview with the David Einhorn, live from new york city. 34 minutes away from the payrolls report. Futures grinding higher, up 71 on the dow. We closed at a record high, a decent tone for the bulls this morning in global equities. From new york, you are watching bloomberg tv. Jonathan the president ditches the Paris Climate Accord and the csuite wishes back. Ceos from Goldman Sachs, tesla, and disney come out swinging. The calmness protect 182,000 additions to payrolls and the Unemployment Rate to hold at a decade low. Markets keep grinding high. U. S. Equities hit a record, another one. Hitspan, the nikkei to 25 a record. Im Jonathan Ferro. Counting you down to the payrolls report, 30 minutes away with a full lineup coming. David a great lineup of guest to react to the payrolls report including bill gross, mohamed elerian, and gary cohn from the white house. Then at 9 00, we will speak with David Einhorn on the g. M. Proxy fight. Futures are firmer. A record high close yesterday. We are higher by. 25 . Been firm this week, if you look at adp yesterday. Still we are anchored in the low 10year. The alix a half hour away from the jobs data and the trade balance in april. Then we hear from Patrick Parker speaking on the economy. Willat 1 00, Robert Kaplan take questions at a luncheon in texas. Oil heading for its biggest weekly loss in four weeks. We look at the rig count from baker hughes. Crude getting hammered. Will the rig count had onto that . We are less than 30 minutes away from the jobs numbers. Set up the stage for this, we are joined by ira jersey. Im not going to ask you to pick a number, but give us a sense of the range. What would be a low number that may affect the fed, a high number that would affect the fed . The standard deviation on Something Like payrolls tends to be in the hundreds of thousands. 100,000 a number under to get the Federal Reserve not to hike this month. Even that kind of number they may look through it because theyre looking at longterm trends as opposed to week over week numbers. The question is what is behind some of that. A very high number would be closer to 300. Junewould certainly push into the 100 cap. The question is if there would be another hike later this year. Perhaps 300,000 would get them worried about overheating the economy. They are worried about inflation, you listen to some of the fed speak. They are worried we are near full employment and inflation could pick up. But you look at the Market Measures of inflation, where ares are trading, tips breaking even. People are not worried about inflation in the median to longterm. They are thinking 1. 85 on average on cpi. David what happens to rates as they raise the federal funds rate . Lets take a look at a chart that you have. ,e have already had three hikes and yet, the 10year has gone nowhere. Is pretty interesting how longterm Interest Rates have remained relatively stable. After they rose quite a lot after the election. That, the reasons for with the Federal Reserve hiking, the market is saying longterm expectations will not get out of control. The Federal Reserve is not behind the curve on inflation, maybe right at the curve. Longterm Interest Rates dont have to move, it is really the front end. Threeyear that really ended been the fulcrum of activities. One hike is built into the front end of the market in 2017. That would better job numbers, and you end up with significantly higher 2year notes and tbill yields. Jonathan ira jersey, thank you for being here. Is heidis now shierholz and diana fuchtgottroth. I want to talk about the different signals that im getting, i look at wages that are just ok, but are not picking up in any big way. What do the signals tell you . Wages are actually picking up and you have to remember wages are aggregate of many different people. We have had a lot of low skill go into theteens workforce which has reduced the average hourly wage, but still in some sectors we see some tightness. I would expect the Federal Reserve to raise its rights when it next meets in june and continues to raise over the next part of the year. Heidi, do you share that view, tightness in the labor market . I think the data is far from a slamdunk right now. We have seen the unappointed rate come down in recent years, which is fantastic, but we still have depressed Labor Force Participation. Even if you just look at prime , you still see Labor Force Participation depressed. One of the reasons we had seen wages remain so low is that people are still coming in from the sidelines. The Labor Force Participation is rising, so the thing that really puts upward pressure on wages is when you have a truly tight labor market, and employers know they have to pay workers bigger wage increases to get and keep the workers they need. We are seeing some of that happened now but there is still a lot of ground to make up. That is the key thing i will be looking at when these numbers come out, what were seeing with wage growth. Alix to get that, you need that tight labor market. Diana, what do you think it is . It is difficult to see what neru is. Many people did not think that it could be at 4. 4 , and as heidi said, the Participation Rate is still very low. It would be very good to see that rising. That is the first thing i will look at when the numbers, this morning, isnt going to go up from last month . We want to see people entering the labor force. The Labor Force Participation rises, and unemployment rises with it, that will not be such a bad sign a copy want to see people have that confidence coming into the labor market. We also want to see more voluntary quits, as people think they can get better jobs. Says wenny blanchflower could see a three handle on the on employment rate, that that is where nairu is. Do you think we get to a 3 , 3. 5 . It is hard to know how low we will go, but it is safe to say we are not there yet. The last time people thought we were in tight labor markets was 1999, 2000. At that point, we had unemployment below 4 . It averaged 4 for the entire year of 2000, so we still have a lot of wiggle room. E,en we start to get to ther then we will have a better assessment of when we can go lower. Of the challenge with Participation Rate is because of demographics . We know diane is not close to the point of being aged out, but there are some. Dont think its demographics at all. We see the Labor Force Participation rate for 35 and over rising steadily. Its interesting to compare private aid workers in the United States with united kingdom. Our Labor Force Participation rate has been going down since the great recession. Theres has been going up. They have a different pattern of welfare and benefits. They have been trying to get people back into the labor force by offering them jobs, rather than benefits or jobs along with benefits. We really need to focus on the prime age workers, 25 to 54. A matter of demographics but the core group of workers in the United States continuing to decline in participation were as comparable economies find the Participation Rate has risen, as is normal after recession. We have not seen at this time and we need to look for that. Economist, labor heidi, what is the one thing the federal government could do to get the Participation Rate up . Say, it is one key category, but there are two key things. We need to boost the economy. That happened through Monetary Policy and fiscal policy. So the fed should not continue to raise rates at this point, until there are clear signals that we are including much stronger wage growth, we are tightening to a point where they need to do that. They really control the on of women right now. Theeed to not have them put brakes on to slow or stop the improvements we are seeing in the Unemployment Rate. The other thing is fiscal policy. We should not be pulling back, we should not be doing things like giving tax cuts to the rich while cutting benefits to the poor, because that is a drag on growth, because you have shifted money toward people who are less likely to spend it. Diana, i will give you a moment to answer the same question. The federal government could reduce taxes, reduce regulation, we need businesses back here. We have the highest Corporate Tax rate in the industrialized world at 39 compared with an average of 25 . Many of our trading partners have 20. Britain is proposing to go down to 17 in 2020 as it leaves the eu. We have businesses that are shut out of the United States in terms of bringing back their earnings, companies that are inverting to be owned by Foreign Companies so they can get their tax rates. We need to get our Corporate Tax rate down. That will help the economy increase employment. The partisanget stuff. We finally got it at the end. Both of you will be sticking with us. Coming up, an interview with David Einhorn. Gm shareholders are voting on his plan to get the share price up. He will be here to explain what he wants to do. Shortly after the release of the jobs numbers, we will be joined by Economic Council director gary cohn. This is bloomberg. Sebastian this is bloomberg daybreak. You can at citigroup to the list of u. S. Investment banks in the mist of a trading slot. The ceo says they are right in line with what other banks have been saying, referring to comments from bank of america and others that trading revenue will fall at least 10 . Tmobile is setting the stage for a possible merger with sprint. Have been meeting with investors to talk about the potential of tens of billions in savings if the deal happens. Discussions are still at an early stage. President has complained about german automakers selling a lot of cars in the u. S. , but bmw and mercedes are counting on their made in america suvs to pull through a sales slump. Both companies all sales declines in the last month, still, the seb was an exception. That is your Bloomberg Business flash. David it was the announcement heard around the world, and for that matter, around the twitter sphere. President trump announced his decision to withdraw from the paris accords and prominent Business Leaders took to twitter to voice their objections with elon musk and bob iger announcing they are withdrawn from the governments advisory council. Lloyd blankfein tweeted for the First Time Ever to express his disappointment on the decision. Joining us now from the white house is our Bloomberg News lyrical reporter. Forthe white house braced this type of Immediate Reaction worldwide, including from the Business Community . Know, the white house was not ready. They knew democrats would come out strongly against the president. The statement and his decision to come out of the agreement, but they were not expecting the Business Community be to be so unified against this decision. We have heard from several [no audio]ders members of the Business Community leaving the white house advisory council. Others say they will work around the president to continue their climate goals. The white house looking more and more isolated, even as the president in his statement said this was a decision good for business, he is finding the Business Community is not taking that all of french, saying this is a bad move, and moving on without the president. David why did the president choose to fight this battle at this point in time, was it simply a miscalculation . From thee been hearing president from over a month that he was making this decision, something he campaigned on, something that he had gone through the first 100 days without this decision was waiting on him as this internal decision inside the white house was going on between people like steve bannon and evocative ivanka trump. Ast seemed to come to a head Stephen Miller and other populous in the white house got the presidency year and were able to convince him. You have all of these other struggles going on within the white house over things like russia and the fbi investigation. This was a chance for the president to say he is fulfilling his Campaign Promise and moving forward. David well, he certainly made a statement. Alix President Trump defended his decision, saying it was all about creating jobs. The paris accord would undermine our economy, hamstrung our workers, weaken our sovereignty, impose unacceptable legal risk, and put us at a permanent disadvantage to the other countries of the world. Say he wasnt on to favoring pittsburgh over paris. But here is the reality. The coal industry only employs about 76,000 workers. Washers, theme parks employ much more at the end of the day than the coal industry. Still with us are Heidi Shierholz and diana fuchtgottroth. Heidi now leads a team that tracks policies and diana has served on President Trumps transition team. Heidi, what jobs is he trying to save . Alix by which industry . By implementing the paris accords, u. S. Emissions would have to decline 27 from 2005 levels by 2025. That would mean electricity costs, energy costs would be higher. That would mean cutbacks across the board, plus, it would be the bottoml because quintile spend 25 of their income on energy and electricity. The top quintile spends 4 . It would make electricity costs go up, Energy Intensive, jobs go offshore. That would not help Global Warming. If our Energy Intensive jobs moved to china or india, which will not come back until 2030 on their emissions, global emissions would stay the same and Global Warming would not be affected. Diana, i do not buy it with natural gas at three dollars. The market will do it for you, it will take out the matter what the paris accord does. Of ourcoal produces 33 electricity right now, but it is not just about coal. Increasing the price of electricity so that admissions throughout the country go down. That means ohio, michigan, pennsylvania, west virginia, all of these states that came up for President Trump are going to be adversely affected. It means americans throughout the country are going to have to pay more for electricity because we are either going to have to reduce emissions through a carbon tax or the regulations. Both will raise the price of energy in our economy and our result in lower economic growth. President trump is absolutely right. Think the oil industry may disagree on that point. Heidi, i want to highlight the energy set her, it is oil and then solar. We talk about the jobs that may be lost, how the president is trying to fix that, but what about the jobs lost in solar, do they stay here or go offshore . Heidi that is the exact point to make. You talk about the benefits of Something Like this, the clean we have goodh analysis, closely related, those kinds of things its important to talk about net jobs created. It is absolutely true that for the Clean Air Act you will see a reduction in jobs in Coal Fired Energy generation, absolutely. But you would see many more jobs due tonvestment investments in Energy Efficiency, new, clean Energy Generations like solar. If you look at the net effect of policies like this, it is a clear positive to the economy, a clear boost to the economy. That is why we are seeing all of these businesses get in line to be the loudest voice against this move that trump made yesterday to withdraw from the paris accord. Panels and turbines are made abroad, imported to the u. S. It is not just a matter of the cost of the different fuels. It is a matter of the cost of electricity and Energy Rising throughout the country. That is what will be the break on economic growth, the drag on economic growth. Solar and wind only exist because of government subsidies. That is not true of oil, natural gas, and coal. Is a static, that view, but if you talk to china, they are approaching the point where they will not need subsidies. Pickingumptions are you it about scientific progress, innovation and alternative fuels when you say it is a 33 increase in the cost of energy . Kind of innovation cannot escape the fact that windmills, for example, only go around when there is wind. Every wind farm has to have an associated natural gas plant to back it up, to fill in the gaps. It costs more to run the natural gas plant when it cycles on and off than it would to run continuously. We cannot escape the fact that wind and solar, wind produced on a large scale, are more expensive than natural gas, oil, and coal. To think otherwise is not facing the scientific facts. Heidi shierholz, diana fuchtgottroth, good to get that perspective. No doubt, on partisan lines. What is the Energy Future at the end of the day . Energy ceos saying it is going to be natural gas. Went back 10 years, you would never have predicted that we would be where we are now, for example, with shale. Jonathan we keep on forgetting, six minutes away from the payrolls . Minutes away from the payrolls report. The dollar edging higher after the upside surprise in the adp report. Theing us from new york is jeffries fx strategist. Quite interesting the dollar struggled to get a firmer footing off the back of a significant upside surprise on adp yesterday. It has been a real struggle for the dollar. Off about 5 for the year if you look at it on a trade weighted basis. The euro has been driving a lot of that, the euro has rallied 6 on the year, over 8 from the lows of january. You have a lot of crosswinds going on in the u. S. , in the dollar generally speaking, big inflows into emerging markets, lack of real upside, real rates in the u. S. , a flattening u. S. Yield curve as well. Dollar to for the gain any upward momentum. The trump trade has fizzled out completely. We are very lackluster right now in the dollar. Dollaryen as well, which is reflecting the broader trade. Came into 2017 with this huge monster short on treasuries. That has turned that long. We came in to 2017 with a monster long on the dollar. Where is that now . Definitely a is little long euro, which is strange given where we were a year ago. Neutral dollaryen. Trademore of a euro yen right now. Along euro, short yen. Neutral on the dollar, definitely not nearly as wellpositioned as before. We are even getting a little bit bullish on the sterling as well, which was also a shift from where we were not long ago. The market is neutral on the dollar, positive on the euro, generally dovish on the yen as well. How are we setting up for the market prices against the base case . The expectation. Wage growth year over year expected to come in at 2. 6 . Are you in line with the base case of the estimates . Jeffries is a little bit above. We are at 195 on the payrolls. Looking for 0. 3 on month over month average hourly earnings. There could be an aberration this month given how they measured it. We may actually have a miss lower on that aberration. But we see a lot of support for wage growth in the numbers come in the recent data. And 195. Or 0. 3 ,he market itself is set up given adp, looking for a big number. 20, would00, even to not catch anyone offsides. 130 orave a big miss, lower, that would catch folks outside. Alix it feels like equity market follows u3, but then the treasury market follows wages. Which indicator will the dollar follow . Definitely wages, because that is key for inflation. We have been waiting for a meaningful pickup in wage growth in all industrial nations. The u. S. Has shown some lackluster signs of that. Grinding in the right direction but not getting that big lift off. We are waiting for that. The dollar, treasuries are all keying off wage growth numbers. Ahead of the numbers, two and a half minutes away. What are you looking for . Payrolls. On which growth of 0. 2 which would get you 2. 6 on year over year. Jonathan what is the risk of a repeat where we got the monster downside surprise . We got that in march, so hopefully that is behind us. There is a potential to miss to the downside. The last three years in the month of may, we have been right around consensus expectations. The risk here is a little bit to the upside given what has happened to adp, how low claims continue to be. Alix wages and u3, what is your call . It is a grind higher. . Ix up by. 0 2 , 2. 20 5 . Everyone is looking to get back to 4 days. That is fairly far away right now. They continued grind higher to 2. 25, hopefully 3 by the end of the year. Jonathan if you had to put a trade on right now, what would it be . Probably long euroyen. Year oryen higher higher on the fragile cover he. The dollar struggling, probably flat. Yen weaker as well. Probably the best way to play it. Jonathan thanks for joining us, brad. We will be sticking with omar sharif. 50 seconds away from the payrolls report. Firmer across the board for global equities. The nikkei 225 up 3000 points. Byures firmer on the nasdaq. 22 . Yields lower. The dollar looking stable, going nowhere against the euro. The numbers you need to look out for, the estimate, 182,000 on payrolls. The previous, 211,000. I want to cross over to michelle at the labor department. No. Payrolls report drops 138,000 in may, much lower than estimates. Revisions taking away 66,000 from the prior two months. Unemployment down to 4. 3 , the lowest in 16 years. But not for a good reason. Labor force participation also down. 62. 7 , the lowest this year. Wages about as estimated. Fairly unimpressive. 0. 2 month on month. 2. 5 year on year. Overall, a fairly ugly report. The tight labor market is making jobs hard to fill. We are still looking for bigger wage gains the tightness should trigger. That might weaken the case for a fed hike later this month. Unemployment dropped underemployment dropped. Discouraged workers also down. Also the lowest since november 2007. Hours steady at 34. 4. Retail down. Construction the highest level since october 2008. Mixed on industry but a pretty ugly report. Jonathan great to have you with us to break down the report. The underemployment rate did come in at 8. 4 , previously a. 6 . 8. 6 . We didnt roll over on the dollar we did roll over on the dollar. Yields lower by a basis point or two. Joining me to break down the numbers and look at markets, omar sharif. Unemployment drops. Wages stay around 2. 5 . What is the story . That is the conundrum, my wages are not picking up as much as we would expect. If you look at productivity growth and growth of the labor force, it is tough to argue wages should be in the 3 to 4 band. 2. 4 is likely the new normal for wage growth. We are right around there. The Labor Force Participation rate over the longer term should continue to decline as demographics take over. Jonathan what does this report mean or fed chair janet yellen . It is disappointing but i do not think it knocks the fat off course for june. It sets up a much tougher september unless job growth rebounds. If the job numbers cool off, remember this is the lower end of their preferred range. We are just above that. If we can do that, i think the fed is on pace for june. Jonathan omair sharif will be sticking with us. Im pleased to say we can cross over to tom keene and david gura. We welcome on Bloomberg Radio and Bloomberg Television janus henderson, bill gross joins us as he always does. It is good to speak to bill gross. I have not done that threemonth moving average of jobs. If we are not getting the jobs growth 10 years ago, is that a surprise . I dont think so. Certainly not at the levels of unemployment now, not only in terms of u3 but u6. And thisonomy matures recovery is close to 10 years in the making, job growth comes down. I think it is to be expected. It is a weaker number than expected that i think it are on steam for a 2 type of real economy Going Forward which may not be what the market is expecting but what i think is going to happen. This onthe tepidness of job permission and wage growth, does it adjust what chair yellen will confront on june 14 . I dont think it changes much. Believes inhe chair job growth more than anything else. To the extent it is lower than the market expected, perhaps. But she is going in june. I think the fed is for clint verklempt. Thannts Inflation Higher the real economy but not necessarily the financial abouts so we have concern financial bubbles in some areas, commercial real estate and so on. To be fair, other Central Banks are pouring on the coal in terms of the Global Economy. The e. C. B. And d. O. J. Now have Balance Sheets larger than the each. 4. 5 trillion plus there is a lot of money coming into the Global Economy. For the fed to join in and stop raising the fed funds level or not address what we have in terms of the Balance Sheet later in the year would be a mistake. Coffee talk with bill gross on job state. Jobs day. Let me ask what happens when the fed starts unwinding what that will mean for term premium. It depends on how fast. We are talking about treasuries and mortgages. Forecasts are the 10 to 15 billion a month which makes an inroad in terms of reducing the Balance Sheet but at a slow pace. I think to answer your question, ultimately the term premium for 5, 10, 30 year treasuries which are a significant part of the Balance Sheet has to increase. As not onlymium forecast but put into evidence by several district fed reserve banks suggested 75 basis points the 4as the net, net of trillion audition we have seen prior to the past two years. You would have to expect the term premium to go up. By 75 basis points . I dont think so but certainly higher over the short term. We have to do a data check for radio and television. This is remarkable. 2. 81 . That is a huge steel. That is a huge deal. For those of you on radio, this is a wow statistic. Bill gross is minting money. That is under 90 basis points. While iwith bill continue to look at the spread market. You are a global investor. We have seen changes to geopolitics over the last 24 hours and the last week plus. How does a different role for the u. S. In the world changer outlook and positioning . I think it is significant. I dont think the market thinks it is stick i dont think the markets think it is significant. In terms of the paris accord and our absence in terms of philosophical absence, it is destructive from my point of view for equities because equities are longterm cash flow dependent. What we are talking about in terms of Global Warming going higher is an increase in longterm liabilities. Ultimately, stocks have to be affected by the potential for the expense, the liability to contain Global Warming if it goes much higher. Come over here again. I make the rules. This chart is the vector of inflation. Thatgross has been dead on core inflation is rolling over. With this jobs report and the spread under 90 with a weaker dollar, would you say even more so now that inflation is just not part of the debate and that gives janet yellen cover to lengthen her path to a normal your policy your policy normal yield policy . I am not sure i understood the two parts of the question. What i think it does for janet yellen is allow her to keep the the longterml, neutral fed funds rate at a lower level than she would have previously. There is a contentious debate among fed officials as to the real longterm fed funds rate, what it is. At the moment, it appears less than zero. I think janet yellen will keep on keeping on as long as Financial Markets in some areas do not show bubble characteristics. How are you adjusting your portfolio . We have seen a bill gross economy over the last two months where it has been a little disappointing. How have you adjusted your portfolio . Lets look at it this way. From all asset classes. We know volatility is low. The vix is less than 10, which is historically low. Necessarily informed on bond volatility but it is historically low as well. When you have volatility in the two major markets at low levels, you do not want to sell that volatility. The Way Investors assume risk and sell volatility is to buy stocks, to buy highyield bonds at relatively low spreads. In other words, they move into markets that have low risk williams they should move into markets that have high risk premiums. This is a market with stocks and bonds where an investor has to be careful because of the low volatility. We will come back with bill gross. Jonathan that was bill gross alongside tom keene and david gura with reaction to the payrolls report which dropped 10 minutes ago. Lets get you up to speed on the report. It is a downside surprise. Here is the intriguing part. Unemployment drops to 4. 3 . Near a decade low. Wages do not climb the way many anticipated they would with unemployment lower. This is what the downside surprise means for markets. It means a weaker dollar. Down. 4 off the back of what is happening in treasuries. Twoyear yields lower by two basis points. The yield curve flatter. 30 year yields down four basis points. 200day movinghe average for the First Time Since september. We now trade at 217 on the 10 year. Futures rollover a bit. We are off session highs. S p 500 futures closing at an alltime high yesterday, up ahead of the open. The open about 50 minutes away. We will bring you even more reaction to the jobs data. From new york city on this payrolls friday, counting you down to the opening bell. A beautiful new york. Ugly headline number. You are watching bloomberg. This is bloomberg daybreak. And this is the hewlettpackard enterprise green room. David einhorn of Greenlight Capital at 9 30 a. M. From new york city, it is payrolls friday. We have a downside surprise. Unemployment drops to 4. 3 . Wages do not accelerate. They come in at 2. 5 year on year, online with the previous month. This is how we reprice, lower, a weaker dollar down 4 . 10 year treasuries down scientists down five basis points on the session. We are just off the lows of the year for 2017. That is the intraday low for 2017. Futures positive on the dow. We come off session highs and roll over on the downside surprise on the payrolls report. Alix what was the downside for treasuries . Over 60 basis points over the next few months. I am just saying. It was in january. Jonathan we breached the tenure moving average in october of last year the 10year moving average in october of last year. Alix how do you interpret these numbers . I think it is disappointing, especially the downward revisions the last couple of months. The labor market does not look as far as expected. 185,000,ges around similar to last year. The labor market does not look as firm as expected but is still quite firm. Alix what do you make of the Market Reaction . Is it overdone . Some indicators are solid. Adp was killer, not reflected so much in the jobs number. We have begun questioning the feds rate pass on the inflation data. This is dealing that fire that is feeling that fire a little bit. I think it is not surprising folks are starting to question whether the fed can go three more times next year. Alix are we looking at a labor market where it is hard to find workers or a labor market that will hold off until they get clarity . I think it is the former, more of a supplyside issue. There are a lot of folks outside the labor market who are not necessarily looking to come back in. They are retiring and leaving the workforce for good so supply is becoming an issue for the labor market in general. Alix what areas are you most worried about . Retail. S killer in retail has been hammered the last few months. We did not see that pick up. What does that tell you about where we are . Retail has been very disappointing all year. The news around retail and shops been a all year has continuing factor. Construction, im worried about the starts data not so great. That has flowed through into the construction figures. The good side of the economy, services is still adding jobs. Jonathan is this a market adjusting to the idea maybe there is a twoway risk in the june fed meeting now . I think it is not just june. It is the overall path. The fed was more aggressive than expected in may with respect to rolling out a plan for the Balance Sheet faster than people anticipated saying they will go later this year. I think we are starting to question whether they can follow through. Jonathan governor brainard earlier this week with a speech about navigating the signals between the Unemployment Rate and inflation. Looking at wages, we are getting different signals. We dropped to 4. 3 . Wages come in at 2. 5 . If you are governor brainerd going into this meeting, are you rethinking things on the margin . I am not sure you are rethinking things on this report. I think you are rethinking about the impression that inflation data. Alix why is june a given if this is a weaker report . For think they set us up june. The expectations of the market are locked in for june. We know that would like to go twice more this year. They aren general looking for the weakness to be transitory. They have said that before. They think they will come out strong in q2. I think the fed would like to go and this will not hold them off. Alix the 10year broke low the 200day moving average. You were right. It broke above at the election. That tends to show significant moves on yields. We were both right. Jonathan omar sharif will be sticking with us. We will have an exclusive interview with David Einhorn. Live from your, 50 minutes away from the opening bell live from your, 50 minutes away from the opening bell, you are watching bloomberg. President trump the paris accord would undermine our economy, hamstring our workers, we can our sovereignty weaken our sovereignty, and put us at a permanent disadvantage to the other countries of the world. That was President Trump yesterday announcing his decision to pull the United States from the paris accord. The backlash was felt immediately. American allies denounced the move. Angela merkel called it extremely regrettable. Corporate executives were unhappy. Bob iger and elon musk resigned from a white house panel. Joining us is Michael Mckee and still with us omair sharif. Connect the dots. The president claims he wants to create jobs first and foremost. How is he creating jobs by pulling out of the paris accord . He is not. David he thinks he is. He is relying on a somewhat flawed study by an Industry Group supporting pulling out of the Paris Climate Accord that said we would lose 2. 7 million jobs by 2025 across all industries by remaining in it. Even the authors of the report say this does not account for new jobs that would be created in the Energy Efficiency space. There is a real flaw economists have pointed out. You look at the latest data from the department of energy and they say in 2017 we are expecting Energy Efficiency jobs across the spectrum to rise by fuely the while the sector declines 3 . David that is energyrelated jobs. We just had a former department of labor chief economist saying if you did comply with the paris accords, the cost of energy would go up 33 and that would lead to job loss far beyond the energy sector. A lot of other people lose their jobs because we would have to pay so much for energy. What about that argument . That argument is not hold water because we are seeing a rapid decline in the price of alternative fuels. Coal industry jobs have followed tremendously. In this latest reports, there were no jobs created and there have not been for months because the price of natural gas is falling so much. Interesting it is happening because donald trump is loosening restrictions on fracking so we can produce more natural gas and bring the cost down. That does not account for what is going to happen. An important point this morning says donald trump maybe playing to the base. People who got him elected are the people have lost jobs in the space. Look at the state of wisconsin. We have a chart produced by the Energy Department that shows there are far more jobs in the efficiency space than any other space. Fuels, almost nothing. Quick inicles, wisconsin have even more people working in solar and wind and other technologies. Are theriefly, what economic consequences to any of this decision to pull out of paris . This is a three to four year unwind if we get that far. The president mentioned wanting to green renegotiate some terms. I dont think it is relevant in the new term for the labor market. David do you agree . Nothing will happen for a long time. We will get more jobs and Energy Efficiency. Jonathan Michael Mckee, thank you very much for joining us. And omair sharif, thank you for joining us as well. Coming up, we will have an exclusive interview with David Einhorn. G. M. Shareholders vote next week on the plan to get the share price up. He will explain how he thinks that could work. From new york counting you down to the opening bell that is 34 minutes away, we are off session highs. The repricing off the back of the downside surprise on the jobs report. Switch the boards quickly. Treasury yields down to 2017 low. It is a weaker dollar story. You are watching bloomberg tv. Jonathan may payrolls reveal a big downside surprise on job gains and inject doubt into the feds next move. The Global Equity markets keep grinding out new alltime highs. In europe, they hit fresh records. The president ditches the Paris Climate Accord. Csuite comes out swinging. Good morning. Im Jonathan Ferro alongside david westin and alix steel with a solid line of guests coming up to react to the payrolls report. David we will be joined by mohamed elerian, plus we will speak with gary cohn from the white house later. 9 30, we have an exclusive interview with Greenlight Capitals David Einhorn on the g. M. Proxy fight. How are the markets responding . Jonathan this is how we are set up ahead of the opening bell. Futures still firmer. It is the headline in the bond market. Treasury yields down to 2017 low, down by four basis points. Against dollar store putting much everything. The euro pushing up. Ahead of the open, lets get you some movers. Alix as you can expect, banks are getting hit hard in premarket. I want to focus on others making waves. Lululemon up 15 premarket, one of the best days this year. Raising the earnings forecast because of better sales for the High Tech Sports bra. Have other retailers getting smacked around. 18 . Barn down by they should do well as oil and gas recovers. That was not the case. Hitoration hardware getting by 21 premarket cutting the fullyear outlook. It is cutting prices to shed excess inventory so a double whammy. Looking at the fallout on alternative Energy Stocks to President Trump pulling out of the paris accord, right around a sixweek low. He does get 40 of its revenues from america. The chair says we are not backing away on clean energy that investors backing away from that stock. Onathan that climate issue the reaction from president putin said it would be impossible to agree on anything without the United States. David there is pressure around the world. Jonathan story we will be on top of on bloomberg. On the market, the only thing that matters is the downside surprise. The surprise is unemployment keeps going lower. 4. 3 . Wages keep disappointing, 2. 5 year on year. Joining us from california is my little area mohamed elerian. Great to catch up with you and get your reaction to the payrolls report. Does this inject doubt into the feds next move and how . , yes it does. But it does not take june off the table. Let me explain why. Weak relative to expectations in terms of job creation but mixed in terms of where you would expect the labor market to be at this stage. We are still creating 138,000 jobs, above the steadystate. Wage growth is not great but ok. When you put these things together, i think it keeps the september hike on the table. Significantly the notion they would hike again in september. June is still on the table, 6070 . Probably off the table at this stage. Jonathan talk about how the economic debate will play out. Unemployment keeps grinding lower. Wages are not accelerating. The one hand, it spells out full employment. How does that play out at the fed . The reduction in the Unemployment Rate this month was completely due to a lower Participation Rate. That is bad news. People are not rejoining the labor market. They are still exiting the labor market. That is bad news in terms of overall growth potential. Unemployment rate is going down for the wrong reasons. Suggest to people sitting around the table that structural impediments to growth our meal are real which would suggest stimulus is not the answer, that you really do need the administration and congress to get going on the progrowth reforms. As for wages, i think it is also structural. All the model suggest wage growth should be much higher. I think there has been a fundamental change in where we create jobs. They have the most sluggish wage dynamic. What this report signals to the fed is focus on the structural issues. They will say that is not our domain, this is about the administration and congress, they need to get going. Alix can i offer the hawkish view and debate you back . If wages have picked up more strongly, we would be talking about how tight the labor market is. Is it a matter of time as we grinding lower . Reaction, a delayed not necessarily something structural . I think it is a matter of time. You are right. But it is taking a long time. You have to ask yourself what that is telling us. Ultimately with more people exiting the labor force, with us having shortages in certain put upward, we will pressure on wages. What you really want is job creation, good wages, and people coming back in because that is what also determines potential growth and not just actual growth. David lets talk about the structural issue you talk about. If people are leaving the working force in the circumstances, it must be because the jobs he offered are not ones they want to take. Is this a supply of jobs issue . Is that something the government can address . They can train people but can the government create attractive, wellpaying jobs . There are a set of real structural issues that are challenging and a set of selfinflicted wounds. On the real structural issues that are challenging, demographics is one and technology is another. We have to think hard about these issues. We also have a set of selfinflicted wounds. Lets go back to the policy debate of a few months ago. We have a tax system that is ito growth antigrowth. Has not been performed properly since the mid1980s. We have not invested enough in infrastructure or people. We have to think seriously about retooling the labor market and the education system. There are a set of structural issues that are complicated. But there is another set that is much easier because we have ounds ond these w ourselves by lagging on the policy response. Jonathan what is the message in the yield curve . Signal in the Treasury Curve we should be paying attention to . There are two signals. One, bad news for banks. The net interest margins will be squeezed. Those betting on the Banking System will face headwinds now. The second message is something you have heard me say over and over again. For those taking risks right now in the stock market, in highyield bonds, this is no longer the trump trade. This is no longer the reflation trade. This is the liquidity trade. You are betting on the three sources of liquidity that have been incredibly powerful Central Banks, corporate profits, and income inequality which means more money to invest back into the market. You are betting these three sources of liquidity will remain strong. That is what you are betting on. You are not betting on the trump rally anymore or the reflation trade anymore. I think it is a reason to change the way you are taking risk. Fewer dollars at risk and where you take your risks, look at emerging markets. But fewer dollars at risk. Alix when you have money moving in such a onesided way, do you need to start buying more protection . Yeah. You have heard me say it over and over again. Be careful about the belly of the curve and think much more about a barbell approach. Part of that is thinking clearly about whether you are protected at the extremes. Yes, this requires you to think differently about the market. The trade has worked so well so far, the liquidity trade has worked so well that it takes a big shock to the market to make people think differently. Jonathan im going to ask a juvenile question. You can tell me off in a commercial break but i have to put you on the spot. How many hikes from the fed . Three. Jonathan another three or another two . Three in total. Jonathan got you. Coming up, we will have an exclusive interview with David Einhorn. Jim shareholders voting next week on the plan to get the share price up. He will be here to explain how he thinks it will work. We are counting down to the opening bell with futures positive but off session highs. You are watching bloomberg tv. Decisionsident trumps to leave the paris accord had a Big International reaction. The president of france saying we need to put the planet first again. On the flipside, you have putin saying do not worry about it. This is what muhammad elerian thinks. Alix still with us to discuss his column is muhammad elerian. Was this the right approach, the aggression from europe and the support from president putin . The approach from the others in the run up to yesterdays decision was wrong. Let me explain why. The reality now is when the u. S. Looks at its international interactions, it has become much more transactional, much more tactical. And it is willing to risk strategic damage over the long term. That is how the u. S. Has changed its approach to international react relations. You saw that in terms of the rhetoric on protectionism and the climate decision. If you are the rest of the world, that is your reality. The u. S. Is dominant so the u. S. Can credibly change its position without being forced to do something else. You have to decide how to respond. Response, asight distasteful as it sounds for other countries, is to try to incentivize the u. S. To stay in. That is what mexico, canada, and china did on trade. They said we are open to negotiations. That is why we have not had protectionism. But when it came to climate, that is not what happened. Now we have a big hit to something very important and was a Foundation Stone to build a prominent proper climate response. Alix is there another side to be made . We saw european leaders unite. Potentiallyup because youre seeing a stronger europe. Couldnt that be a positive thing for European Growth . It could be a positive thing. But lets be real. Without the u. S. , a lot of these International Agreements will not work. You need the u. S. , the u. S. Is the dominant force in the Global Economy. You can unite as much as you want and say nice things and to some degree help on your own regional issues. But when it comes to global accord, the u. S. Is still the dominant player. David isnt it possible we have built in a permanent free rider problem . If you are the rest of the world, it is not an alternative to say lets start polluting again. Is it possible the rest of the world would be better off going the way they have been going, curtailing the Greenhouse Gases even if the United States does not go along . Yes in the shortterm. But they have to somehow bring the u. S. Back. They have to think about how to incentivize the u. S. To participate in this issue. It is a shared responsibility. It is a global issue. Unless you have a global approach. Economists will tell you this is a typical problem. You cannot simply ignore somebody else when it comes to climate issues. You have to find a way to incentivize the main players to cooperate. Market forces been driving down per capita pollution from the United States without regard to agreements . Yes, you are right. But the level at which we are at is too high. The level is the problem. The change has been going in the right direction. The level is high. In other parts of the world that are yet to fully develop that will be increasing consumption, it has got to start globally. There is no way we can avoid the consequences of Climate Change regardless of what the source is. Alix what is the right incentive . The right incentive is to turn it back into a shared responsibility, to take seriously the fact the biggest player is unhappy about distributional issues and to try to discuss them. That is what we have seen happening on nafta. That is what china went out of its way to do on trade. That is why people worry much less today about the dismantling tariffs and prohibitive on china to trigger a trade war. David thank you so much, a home elerian mohamed elerian. Coming up, we will have an exclusive interview with David Einhorn. Next, we will be joined by the center, and outspoken skeptic of Global Warming. Live from new york, this is bloomberg. \ jonathan from new york city, you are watching bloomberg. We are about 10 minutes away from the opening bell. Futures still positive. Alltime highs at the close on the s p 500 yesterday. The action in the treasury market following the downside surprise on the payrolls report, we breached briefly a 2017 low on 10year yields. Just offset now down three. Does mean a softer dollar story in the fx market, specifically against the euro. David thank you. We will turn back to climate now. During his 23 years representing oklahoma in the senate, jim inhofe has taken a leadership role on the environment including chairman of the committee on environment. About not been shy challenging Global Warming calling it a hoax. Senator inhofe joins us from tulsa. Welcome to the program. Thank you for being here. It is the day after. Do you regard this as a victory for you personally and more broadly for the country . Becauseld say both there is a lot of pressure to do something that was not in the best interests of our country. Lets keep in mind, supposedly each country is making a contribution to some kind of an agreement in paris. The contribution obama made on behalf of this country was that by 27 d reduce emissions by 2025. The problem with that is two problems. First of all, it cannot be done. According to his own e. P. A. , it was impossible. There was no way we could accomplish that. Secondly, other countries do not know this but in our form of government, it is not just the president. Congress has to agree to this type of thing. President obama tried for eight years to get congress to agree and they laughed at him. He did not get half of the votes he wanted. It is kind of interesting. They are all crying and demagoging this thing. They had the opportunity to do it. Obama had the house, senate, and white house and could not do it. That is where we are today. The other countries, china for example, they are laughing at us too because their commitment is they would increase their emissions for another 13 years. Then they will talk about reducing their co2 emissions. A lot of people are not aware of this. They are cranking out an each 10al power plant days. And then you have countries like india. They say our contribution is we will take 2. 5 trillion and sign on and do something. That would constitute the largest single tax increase in history of this country. David the president yesterday said it was unfair, this was not fairly shared. My question for you is, would you be in favor of an International Agreement that was fair to the United States that did have us reduce emissions to a degree you think is feasible . Would you be in favor of that if they could come up with that agreement . If they could. That is a big if. They tried to do this year after year and have not been able to do it. It always ends up a huge burden for the United States of america. By the way, somebody on your program a minute ago as i was listening to it said we have reduced dramatically our co2 emissions in this country while other countries have not done that. I say we are doing it. We are taking care of the problem as best we can hear. By the way, we have to admit if we did something in this country , it will not have an effect on emissions worldwide. Everybody knows that. David is it worth pursuing the goal of reducing Greenhouse Gas emissions around the world . We are doing that anyway. At the countries where the real problems are, it would be china and india. And they are increasing, not decreasing. And by the way, i have gone to a couple of these december United Nations parties they have had for 21 years. When i talk to people from countries in africa and elsewhere, they say we dont care about this but this is where the money is. All of these people, 192 of them, most of them are coming thinking they will get some large block of money out of this thing. Fund,uently, the green our president obama was making big contributions to the green fund. But they were all coming from the United States. Other people were not participating. David we have this system at bloomberg that uses the terminal. We have a question from a viewer asking apart from whether the quotas are fair, this is a voluntary agreement. Do you have a problem with compliance . Do you doubt chinas compliance with what they have voluntarily agreed to . They have agreed to increase their e. P. A. , so yes i agree with that. David you think they will comply with what they committed to . They are increasing their emissions. That is what china is doing. They are saying we will continue to increase for 13 years, then we will talk about they did not make a commitment we will talk about reducing. That is a totally different thing. You cannot answer the question because it is assuming they made a commitment they have not made. David senator, thank you very much for being here. Jonathan . Jonathan the headline, a downside surprise for the u. S. Payrolls support. The present 130,000. On the dow andrm s p. The fallout elsewhere. The treasury market, yields lower by five basis points. It is a weaker dollar story across much of the fx space. Jonathan wrong new york city, you from new york city, you are watching bloomberg daybreak. Up 19 on the dow. Yesterday at alltime high. Off session highs following a downside surprise on the payrolls report. What does that mean . Low ons a yeartodate 10your treasury yields, just off that now. Market, the dollar weaker. 4 lower. To 47. 53. Ing over about 27 seconds into the session, here is alix steel. Alix the s p flat, the nasdaq flat but still in record territory. The dow unchanged around record territory we have seen. One area of the market just getting slammed today has to do with banking stocks. Look at how it is playing out. Goldman sachs printed a sixmonth low on wednesday. It has been a terrible week. They all warned about their trading outlook. Weighing on the banking stocks today. Jonathan thank you very much. , upminute into the session front on the banks having a tough time on what is happening with treasury yields it has been a tough week. It has been a tough week. A few months ago, we were talking about subprime credit showing cracks in the foundation, auto loan growth slowing, now you add to that the 10year rolling over, the yield flattening, and there is not a lot left to support. Jonathan we have the lead since the peak in march. Profits with relatively intact. Ago. Comps to year what is happening in financials is a lot of hiding in insurance because that is an area financials not as subject to broader macro concerns. There is not a lot of optimism left in this area. Alix we still keep printing record highs. How does that continue when you do not have the financials and Energy Producer baiting . It is interesting. The price looks great but the lack of support is an underlying concern. The last time we saw Something Like this was a year ago as we were leading into brexit. The market was breaking higher but not under strong momentum. It took the brexit washout before we could see markets move higher again. What is the washout this summer . It is anybodys guess. We will see great maybe some budget battles. Jonathan i am not sure we want budget battles. Alix it is coming. Jonathan thank you for joining us. I want to cross over to david westin standing by in the new york city area with a special guest. A lot of things have been going well but the stock price does not reflect it. The stock market overall has been up dramatically. Joining me on Bloomberg Television and radio is the man with a plan he says will address the last piece of the puzzle for General Motors. David einhorn is cofounder and president of Greenlight Capital which he says will address the anomaly of a Successful Company with a lackluster stock price. Lets start with the problem. What is your analysis of the problem . Why has the stock price not reflected a fairly Successful Operation . Strong in a. M. Is number of areas of its business and his made good moves to position itself well for the future. There are lots of areas in operating an automobile company. Is area where g. M. Is weak in its capital structure. Weak in finance and has a Balance Sheet too conservative. The company has a market cap of about 50 billion. They have 20 billion in cash. They have another 14 billion. They have a few billion dollars more in cash offshore in places like china that is not even counted. With so much value locked in cash preserving for the downside, it leaves and inefficient capital structure for the company. Shareholders have been rewarded with the lowest multiple in the entire s p 500. It trades at a huge discount even to ford. Multiple, the stock would be 3040 higher. Something needs to be done to unlock the value at g. M. David is that is the diagnosis . Why have they not addressed it . Mary knows there is a problem. She has a team around her. Why havent they addressed it . I think there is caring about a stock price and caring about a stock price. I could lose the last five pounds but do i care enough to change my diet and exercise to do that . Where i would rather have five pounds less, i am not willing to do that. G. M. Would prefer a higher stock price but not willing to do what it takes to make that happen. David is also possible they are scarred from the expense of going bankrupt and having come back into the marketplace and saying we need money for a rainy day . Might they be right about that . Sure. Arecompany has said they forever grateful to the United States for bailing them out and preserving the company through the last recession. The company is capitalized to make sure that positively never happens again. I think there are several ways to get at that thing. One is you could decide you are fighting the last war and changer Balance Sheet to make it more conducive to the Current Business and cost structure of the company which has structurally improved which would require much less liquidity in cash. Or you could do something kind of clever. We have a clever proposal we have made which allows the company to keep all of its cash, all of its rainy day money, to have its preservation for any future downturn that comes the exact same way they have it now, but would unlock the value at g. M. David take us through that clever plan. It involves two classes of stock. What are those classes . We are saying you have a stock right now. As the owners, you get dividends and all the other values of ownership. If you separated out the value of the dividends from all the other values, you would unlock 3050 increase in the values of the stock. David there is a dividend share and a growth share. Correct. David each shareholder would get one of each . One of each. It would have the same dividend now in the same growth. But if you wanted to come you could trade one or the other. The result is people who are more interested in dividends, he would have new buyers for those dividend shares. And alternatively, if youre not interested in the dividend but the growth, you would buy the other shares. David if the market were working properly, the value of those two shares should equal the value of the one now. You in your proposal say you think there is a fair amount of upside. Why is that . It has to do with choice. Think of it as an ice cream stand that sells just vanilla chocolate swirl. Some people like vanilla chocolate swirl. We will call those the g. M. Shareholders. Sold chocolate, vanilla, or swirl in any combination you want. The ice cream stand would attract more customers. People would be interested in the income feature of the dividend. They would buy the dividend shares. Those would be new participants in the market. They would bid them we think to a 7 to 9 yield. There are people not interested in the dividend but want to see the stock a lot. They would buy the growth shares. We think that we trade at about the same now. Adding the math together would unlock the value. Either choice would bring in new investors. David you took that matthew mary barra and her team you took that math to mary barra and her team. Why did they not want to do it . I think they never really engaged in it. They have done from the very beginning they have fought what we have done from the beginning. What we wanted was a collaborative process to solve the Balance Sheet process problem at g. M. In addition to our plan up for the Shareholder Meeting next week, we have nominated three directors that bring in enormous Capital Markets sophistication which is not present at g. M. I think the c. F. O. Is a little weak. Mary barra is a wonderful c. E. O. But finance is one area where she is not as strong as other areas. I think the board lacks this level of financial expertise. If the shareholders vote them on, we were bringing in three people who are good in this area. One is the c. E. O. With john malone for all those years. He did all kinds of clever things with their Balance Sheet to minimize the cost of capital. Minimizing cost of capital is important because g. M. Needs to Access Capital to fund itself. That is a basic function of a business. That is why you bring in that kind of expertise. We have meal thorndike neal thorndike who wrote the outsiders. And my partner who is a genius at Capital Asset pricing models. David has this ever been done in any of the company successfully, this sort of restructuring . Many companies have divided equity interests. There are all kinds of companies that have transformed their businesses to create one stream of income and another stream of capital appreciation. David if you are the c. E. O. And have this happen, presumably, you could sell want to keep the others. How do you avoid a conflict of interest . Decision, cash gets shorter. How do you make a decision that does not favor one group over the other . The dividend is stable. G. M. Pays out a little over two main dollars in dividends. That is what would happen in this proposal. First 20 million on the Balance Sheet. Eight years of dividends. The answer to the dividend is you just pay the dividend. Are paid directors hundreds of thousands of dollars a year to balance out competing interests of different stakeholders. Those could be suppliers, workers, managers, executives, regulators,ealers, the general public, creditors, and shareholders. The idea this board thinks the corporate evidence concern is so much they should reject a plan that would increase the stock price by 30 to 50 over a potential conflict basically says this board is not engaged to do his job. David it appears it is not just management that has not been enthusiastic about this. The market overall has not responded. When you came out with this proposal, the market did not pick g. M. Shares up. Isnt the market at least questioning what you are proposing . There is no doubt about that. To. Is spending 50 million pedal the barricades on their own stock the bear price on their own stock. They are saying we can do nothing about it. We are an auto company at the top of the cycle. Nothing can be done until we get to the downturn. If you dont like that, you should sell the stock. They have been running around to shareholders pitching the bear case on their own stock saying and innovation any innovation is too risky to com contemplate. People are sensing fear as opposed to optimism from management. I think that is having a negative impact on the stock. David we are talking with David Einhorn about his proposal for General Motors. We had in a prominent auto analyst for Morgan Stanley the day before yesterday. And talking about the relative value of tesla and General Motors, he said if you gave me 20 billion to get to either elon musk or mary barra i would give it to elon musk. That was his response. What is your response to that because you have a short position on tesla . I think it is a question what the purpose of the 20 billion is. If it is to earn a profit and return, i think you would give it to mary barra because g. M. Is interested in its return on capital. They are trying to make about a 20 return on invested capital. That is a wonderful return on 20 billion to the extent they were able to deploy it. Is the purpose of a business is to advance the future, to have science experiments and cool buzzword things, you would get because you have a guy who has done all kinds of fancy innovation and is thinking about how society should be 50 years from now. But he has yet to take any money and turn it into a profitable business. I dont have any optimism that will change. David you may be right. We will find out about tesla. They seem to be a lot of investors willing to give him more money to do science experiments or whatever he is doing. How much commitment do you have to have as an investor . When you go short on tesla, that can get painful. Tesla is one of many things we have in our bubble basket of stocks we think are mispriced by huge amounts. It gives us the ability to wait a fair amount of time to be proven right or wrong. I think eventually the mood of the market will change. Eventually, the company will be called into account to demonstrate profitability. I dont know when that will happen. The portfolio is positioned properly relative to risk and reward. David you have a large position in General Motors. You own 3. 6 of the shares. Much larger than our tesla short. David exactly. If you dont get your free members on the board and your plan does not go forward, what do you do with that position in General Motors . Our investment in General Motors goes back before we started. Basically bought the stock in 2011. We did sell it a little while around the ignition recall issue. Basically, we have been large holders of the stock for six years. Our investment thesis is not predicated on this plan being put into place where our directors being nominated. Those are things that came up along the way as part of a multiyear investment we have had in g. M. I would look to apple where we had a similar experience talking about an idea we advanced a few years ago. Even though they did not do exactly what we wanted, they did change the capital policy and unlocked a lot of value. We are still large holders of apple today although we have reduced the position some. David im glad you raised apple. There was an extraordinary stock buyback got a lot of cash into shareholders hands. With that satisfy you with General Motors . With apple, they had a problem with capital allocation. They were storing cash and returning them to shareholders. We had an idea that some thought was too clever. They changed their constraints. They previously said we are not buying back stock. Since then, they have bought back 1 4 of the stock at less than 100 per share. The net of cash was expanded from seven to 13 because they have a Better Capital allocation policy today. G. M. Has a similar inefficient Balance Sheet. They have said there are constraints because they want to retain all of this money for a potential rainy day. There are several ways to get at this. Hour purpose elected directors is to get that problem. It could be through the plan and proposal or it could be an alternate solution. When you look at g. M. And see your positive 30year debt is 5. 25 and your cost of equity big of a gapis too and something needs to be done to close that. David you are a long short investor. Have had extraordinary success through your career, legendary success. It has not been easy the last little while. You are not alone in that. Other hedge funds have been struggling. You are an expert. Does that tell us something larger about that way of investing or is this a temporary aberration . I believe it is cyclical. Certain types of stocks to better than other types. We are probably about three years into a. Period that has been a headwind for our style of investing. Does it put pressure on you in terms of investing and fees paid . Do you feel pressure . I have been very lucky in my career. When we started green light in 1996 with 1 million, i never envisioned it would be close to what it has turned out to be. When we reached 100 million, i thought we hit success i never would have imagined. Since then, i have never cared about the size of the fund. It will go up or down. We have been open for new investment for many years. My goal is not to manage the most money. My job is to do a good job with the money we do manage. David going back to General Motors, if you are successful, will it be because mary barra changes her mind or because you get your three directors on the board . I guess i do not know the answer. There are lots of different ways to get at success. David thank you. That is David Einhorn of Greenlight Capital. Jonathan thank you. Lets get back to the payroll story. For the month of may, gaining 138,000 falling short of consensus. Joining me now on Bloomberg Television and radio from the white house is gary cohn. Great to have you with us on the program. This administration has made a great deal about people returning to the workforce. The Participation Rate is lower. Is that a disappointment for your administration . Numbert obsess on anyone in any employment report. We revise them from month to month. The overall trend is really good. Youe inauguration day, the u6 rate is down. We brought that people dissatisfied or underemployed in the u. S. Workforce. That is a really amazing trend. There are some very there is a very good news in this labor report. We are down to an Unemployment Rate we have not been down to since 2001. Trend is very good. The trend is a trend we like a lot. We still think there is a lot we in the administration can do and we are working on that. We are working on regulatory reform, tax reform, infrastructure. All these are areas that will continue to draw more workers back to the workforce and improve wages. David why doesnt the bond market by it . Treasury yields are grinding lower. The market is not buying the story. The signal in the Treasury Curve is the story youre telling me now is not real. Why do you think the view at the white house is difficult to reconcile with the view of the bond market right now . You are getting a bunch of diversions. The equity market is telling you a different story. We had the equity market at record highs last night. You had the equity market open higher today. We are in a period of sustained growth. The market is telling you that. We still think there is a lot more did administration can do to drive the economy. I think the bond market is telling you there is more that can be done to drive the economy. The bond market is saying we are ready for you to drive this economy and we know theres opportunity but we are happy to own bonds in the meantime. Jonathan lets take your example and look at the equity market. The equity market was flying your story in a big way. Story over the last couple of months is not spell out successfully trump administration. Bank stocks are down since march. The performance has come from a handful of companies. Facebook, amazon, google whose path is completely independent of anything that happens in d. C. Have to me say the record high in the equity market has anything to do with your administration . There is a record high across the board. However it is being driven,. As a record high. That means investors are creating wealth. We have created over 3 trillion in wealth in individual investments, endowments, trusts. You are creating wealth. We have broad consensus across the market. If you own the index, you own the market product. They are benefiting from what is going on in the market. They are benefiting from the appreciation. November 8 is the day of the election. If you look at market appreciation, it has been brought across all indices. Alix banks are not participating. How can you have a rally of thanks to not participate how can you have a rally that is to say no sustainable if banks do not participate . Go back to november 8 and tell me if theres breath or not. Alix i would say not. The leader will be bonds. It will not be banks. If you want to pick any sector at any time, you can. A month ago, would have been talking the opposite. I will not debate market moves. We have to look at this in the longer trend. I am going back to november 8 and giving you the trend. I like the trend. David lets go to tax reform. There are rumblings on capitol hill that the white house might be dragging its heels waiting for leadership out of the white house. When are we going to have a specific proposal that goes beyond the outline . We has said this publicly. We are actively engaged with house and Senate Leadership in working out a tax plan that the house and senate and white house are going to agree to. We are going to release our tax plan when we have negotiated with those groups and there is consensus. In the meantime, we are holding a variety of listening sessions with Industry Groups, leadership groups, governing groups to get as much input as we can. We think the most effectively to get tax reform done is when we release a bill, have a final bill done, and not been negotiating on the floor to have a bill done. We know there is consensus when we release that bill. That is where we are headed. We said in the beginning this would be a long process. We would get to it toward the end of the year. We were committed to get tax reform done by year end. We are working as hard as we can to get tax reform done this year. David Monetary Policy. I know that is not directly in your purview. What is the thinking you and the president have on Monetary Policy . Is it in the right place . Is janet yellen the right person for the job . You will have to talk to janet yellen about Monetary Policy. Alix in favor her staying in that role . Not thinking about that. Her term runs in the next year. Janet yellen is running the Federal Reserve now. Alix do you want to . If they said the want to do this, would you . I have a great job now. I get to work in the white house every day. Workingdream come true as a pfizer to the president. Im very happy. As an advisor to the president. I am very happy. Is the paris accord position going to make your job easier or harder . The way we will drive jobs and job creation in america is fixed the regulatory environment, fix tax policy, and drive infrastructure. Those are the core principles. Had many different Business Leaders into the white house. Have said those are the three areas where the United States needs to fix the situation to drive growth and wages at opportunities for americans. That is what we are committed to do. David are there a lot of good paying jobs in the Renewable Energy area which employs a lot more people than coal . Isnt that an opportunity to drive the economy in Renewable Energy . We are agnostic to where the jobs grow. We want jobs to grow everywhere. Coal, Renewable Energy, technology, manufacturing, service. All of these areas. We love all of those areas. We want jobs to grow and wages to grow. We did not talk about wage growth. We have had stagnant wage growth for two years. That is not good enough. We are not putting enough disposable income back in consumers pockets. American citizens deserve better wage growth and then they become better consumers. We dont care where jobs get created. We need more jobs to increase competition to increase the standard of living. Jonathan i want to put the together put together the beginning of the conversation with the end. How to you get participation and wage growth up as well . We will get participation and wage growth up by clearing opportunities for american businesses are getting rid of the regulatory incumbents and obstacles they have. There are so many obstacles. By making us more competitive by lowering the tax rate and improving our infrastructure which will make us more globally competitive. Businesses will want to move back to the United States. When they move back, they will need to hire more workers. There will be competition for labor that will drive wages. David thank you so much for being here. Jonathan 28 minutes into the session. Lets get you up to speed on the market action. The downside surprise in the payrolls report mixing things up. Futures were stable going into the open. Stocks just hit another alltime high on the s p 500 and rolled over. The administration would like you to look at the record highs in the equity market as an example of their success. I think a lot of people are looking to the bond market with the lack of optimism. Kept a 2017 low. Down four basis points on the session. The spreads rolling over. A flatter yield curve in the treasury market. In the fx market, you anticipate a weaker dollar store. That is what we see today. Firmer, up. 6 . Nsideeadline, a dow surprise on the payrolls report. With is the wage growth unemployment at a decade low . That question and the answer is coming up on bloomberg tv. Thank you. From new york, you are watching bloomberg. It is 10 00 and new york. I am vonnie quinn. Welcome to bloomberg markets. Here are the top stories. Investors in the United States shrugging off a mixed jobs report sending stocks to record levels. Lower. Unemployment rate we will bring you part of our exclusive interview with David Einhorn. Why he says General Motors is peddling a bear case on its own stock. Everyone is reacting to president Donald Trumps decision to pull the u. S. Out of the Paris Climate Accord. We will examine the fallout and how it might be up to big business and others to invest in green energy. We are about 30
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