Transcripts For BLOOMBERG Bloomberg Go 20160902

we will talk about what is happening with the payroll number and what is happening with our interview with Vladimir Putin. The week oil has had . It has been shocking. We may about the idea see stabilizing in that market. A lot to talk about. You have a great conversation coming up. You have an allstar cast and preview. Alan krueger will help us. We are going to get fresh reaction from the white house with jason furman. Alex a positive tone into the eight 30s jobs. You have to look at where investors are going into. Theyre going into health care and the safety trades. Market, it is about the stronger dollar. The dollar is stronger across the board. Up . Rent Vladimir Putin saying a freeze can happen between russia and opec. That is helping oil, which has had its worst week since january. In the bond market, look what happened to the japanese 30 yield 30 year yield. This is what happened. Bmj went to the market boj went to the market and bought maturities 10 years or shorter. It is not just in japan. We are seeing cups across the board. Guy we are going to talk about what we have going around the planet. Washington,to go to. C. Greg white is starting off with an interview of the russian president. Hn has a lookrry and at the u. S. Jobs report. Lets start off with the conversation with Vladimir Putin. He sat down with a rare, exclusive interview. Take a listen. That is why they attack each other. I dont think that is the best example. That is the u. S. Political culture. Guy greg white joins us. What was the take away from the conversation . Push putin on the question of whether he is favoring one candidate or another. He did his best to avoid answering that. Russian potential meddling in the campaign has been important. Down was trying to calm and push back a bit. God says he was having a little bit of fun with it. He was talking about the shock tactics. With all of the shock tactics, they are smart people. Guy Vladimir Putin talking there. Wrap things up briefly, when we look at what he said on oil, what was the takeaway . He russia backs the of green with opec. He said whether iran should be allowed extra quota to make up for the lost production because of sanctions. That is something russia would like to see a compromise on. Guy tune in to watch our exclusive interview. Dont miss our special report on monday. We are joined now with a preview of the u. S. Payroll report. 180 is the number. What are we expecting . If we look at the last five to 10 years, august has tended that is giving forecasters pause heading into this number. To make here,nt this is not a cliffhanger report. Gdp was running at two point 2 . It is a full Percentage Points lower. Now. 1. 2 that is a slower pace. Right now, we are looking at gdp that averaged less than 1 heading into september. It would be inappropriate, as well. Alix what is topping the g20 agenda this year . Inclusive and interconnected development is a central theme of the summit. Given thesing economic nationalism we have seen around the world. This is a highprofile meeting of global leaders. Very tight here around the city. We are seeing clear blue skies, a rare sight. A ghost city here. No cars and traffic. It will be an opportunity for china to take a Global Leadership in making Global Governance rules. They expect china to be more active on fiscal policies and we are expecting president obamas last g20 summit and he is expected to talk about pressing overcapacity, although analysts do not expect much to come out of that as china refuses to take concrete actions. We could see a bit of tension with neighbors over territorial disputes in the south and east china seas. Alix thank you. We are looking at dollar yuan. You are looking at other movers in the markets. About the movers around the world. Deutsche bank has had a great week. Trying to say our strategy is not working. Lets figure out what is going to happen. We will wait and watch to see what is happening. The next stuff i want to talk about, adidas. Callaway saying it is not looking at the assets of adidas when it comes to gold. Where we go with this is difficult to say. Cans difficult to get these dollar these consolidation stories to work. Lululemon, down hard. The guidance here, the market . 44. Certainly, it is hurting. Back to you. Alix adidas. Clearly you are british. Hurricane hermine has weekend. It made landfall today and lost steam after pushing into georgia. It has wind about 70 miles per to bring 10expected inches of rain to the carolinas. Other parts of the east coast could be in for dangerous flooding. Mark zuckerberg says he is disappointed. The faa is overseeing spacexs investigation. The worlds biggest bang for the brexit deal. According to a female familiar german chancellor Angela Merkel may stand in the way. Day innews, 24 hours a more than 120 countries. This is bloomberg. Guy coming up, testing the waters. U. S. Payroll report be the green light for a fed hike . This is bloomberg. Alix blue bar is estimates and the orange bar is how the numbers came in. All we are talking about is how important the number is, but the jobs picture is has been good for a wild. For a while. Testing the waters. Look atd the markets to the notions. If the number is not Strong Enough, especially after the pmi yesterday, september is off the table from the markets perspective. Then, we will have this conversation about a december. The fed wants to go and they are the only central bank that wants a hike. That moves the dollar. When the dollar moves, it moves commodity markert markets. They need the markets permission, basically. We guy you said 50 as they line in the sand. I thought the number had to be higher than that. By the market. It is led by the market. That is why look at these odds. Enough,number is good above consensus at this point. Not move the needle above 50 , the markets review is off the table. Risk that thethe to. Is not going if the fed is not going to move, my senses, if they wanted to , they are lucky if they can move once. They want to go at least once. They made it clear through speeches. Have put the markets on notice. Even if they do, i think the markets are better able to handle it. A year ago, they wanted to go in september and then we had the yuan devaluation. They went in december with permission. Downward pressure on the chinese currency. They were able to do it without upsetting financial conditions. No one was looking. Theent to a new low against dollar. The market is better able to handle at this time. The earnings picture has improved slightly. Fed hikes, we will survive it. I know we are focused on the next one hour 11 minutes. Over a decade to get inflation out of the u. S. System. It could take a similar amount of time to get back into the system. What is the longterm prognosis . Quick sick comes down to the equilibrium rate. It comes down to the equilibrium rate. Look at thehen you bowler. Is the dot. Owler buller and you have a lot of steps aging demographics and negative productivity growth, you are the only central bank that wants to tighten and the impact that has on financial conditions, maybe that is all we are going to see. Alix it is great to get your perspective. Hawkish in the short term and dovish in the long term and how that lines out playing in the markets. The payroll pfrom to the putin p. Vladimir putin down with john wastes best john nichols sitting down with john. Is not a state company. Lets not forget that 19. 7 belongs to. That is a british company. Quick see you may have more control than theresa may has over bp. Maybe we have more control, but it is not a safe company. A clear fact. 19. 7 belongs to a foreign investor. Nevertheless, given the controlling day, it is probably onethe test option to have company under state control. This is one position. The second is in the final analysis. It is important who gives more money in the auctions. It should be organized as part of the privatization process. We cannotminate discriminate against market participants. On the question of privatization, you said you wanted to expand. You have had a difficult time of it. Why is that and is there a case why does the russian government need to own 50 of these companies . The government has no need to hold specialized things. It is not whether we are wanted or not. [indiscernible] sense. Whole, this makes from the standpoint of structural changes in the economy. In the foreign market, from the point of view of fiscal interest, it does not always make sense. [indiscernible] gradual withdrawal from certain assets is unchanged in remains unchanged. You mentioned. We are preparing to privatize part of itself. We saw the state in one of the biggest diamond producers and russia. We are working the same way and other areas. We are changing our fundamental position. It is not a moment when we should make a fuss. [indiscernible] it with the maximum russian economy. Year, would do this sell the shares in rosneft this year, you hope. We are preparing this year. I dont know if the government can prepare [indiscernible] i think we should be talking about [indiscernible] we are planning and preparing to do the deal this year. Be happy where the russian world had less than 50 of these Big Companies . We dont see anything horrible in this. The contributions to the budget,. Ax payments increased from the viewpoint of the states interest, from the center point of the fiscal interest [indiscernible] guy that was Vladimir Putin speaking with the bloomberg. Ditor in chief alex is one of the most popular politicians in the world. Alix, one of the most popular politicians in the world. Alix speaking of the costs, the Shell Oil Company looks good as prices fall. Pioneer national. Esources an exclusive interview next. This is bloomberg. And is almost 7 30 a. M. On wall street. With Vladimir Putin, and interview you will only see here. The headwn with john, of the g20 summit. Ayroll friday, 180,000 jobs acted to have been added. Treasuries are moving lower. Sales halted. Samsungs remark is recalling phones galaxy note seven phones due to a faulty battery. Rotation into the defensive names Like Health Care and utilities that are leading the charge. In the ss market, you have to look at the dollar. It is mushy on either side. It is stronger versus the yen. The 10 year yield, 1. 58 . It is a backup and that yield in the u. S. I keep my eye on crude. Latimer putin said there could talks between russia and opec about an oil freeze. Guy take a listen. The way the u. K. Will decide to pursue you might have a long. Uncertainty. To of guy tom keene joins us now. I am beginning to wonder if euro officials are using it as a catchall excuse. The idea, president putin talking about the challenges to , that is whatit has happened the last 10 days. It is a study of how europe gets there act together and how europe responds to whatever the Prime Minister may choose. We saw the manufacturing data yesterday. A decent number. Construction number today, popping back out of the u. K. There is a danger here. These guys are doing a little too well right now. A lot of people distracted by elections. As we go through various meetings in the g20, i really brexit happenhy to begin with was less about england, that is not a correct statement. It is about a disorganized europe and the perception it has been disorganized for many years. Talking about this idea of brexit being a symptom rather than a cause. Tom keene from surveillance radio, always a pleasure. Quakes it is the shale oil company that looks good as prices fall. It is one of the Biggest Oil Companies operating. Of 664crude reserves million barrels. Many rigs in the play as the next closest operator. Everyone else will know it is pioneer natural resources. The companys equity has nothing more than option value. Alix this is how other investors know of pioneer. It has outperformed the oil price. High near up 52 in the past year. They have no other field other than texas. The ceo is retiring at the emd of this year. He joins us now for an exclusive conversation. It is a true pleasure to speak with you today. You do it . Oil prices, you still made money. How is that possible . Had the best Balance Sheet in the business. Withdownturn, we entered zero debt. We can grow 15 per year. Rings are you adding today . We are at 12 and we are adding five more. Can you grow the rig count . We laid out a Production Profile of 50 per year. We are adding about five to six rigs per year. Lowing lowering your. That is relatively unheard of. Have the bar charts, which are your Production Profiles. What is your key that lets you do that . We have the service industry, which has lower their cost. Reason, theyrtant are optimizing, drilling wells in 18 days. We are highly focused. We are optimizing our completion , more sand, more water, reducing cluster spacing, adding more stages. Part of what shale oil has been benefiting from is lowcost. Your drilling costs have fallen 35 . The other part is your own efficiency game. Your own efficiency gain. Aremuch cost savings sticking . At least half. If it starts moving up towards 65, service cost will clawback against those reductions of cost, but not the optimization. The optimization will stay there. That will stick. Even if you have an oil service calling saying they are going to raise you, it does not change your Production Profile. Next five years, 15 growth on average. A it feels Like Shale Oil was victim of its own success. Andy you see that dynamic . The was speaking at conference recently. We laid out a Growth Profile from the basin. Next year, going up to 56 for the next 10 years. And has the highest margins and lowest cost. Outperforms. T even price is less than 30 a barrel. Our operating costs are down over 26 this year. We have two dollars in taxes on top of that. When you take out the state taxes, the county school, the hospital, it is equivalent. You had high production rates. It slowly declines. You have to drill more, faster, use cash flow to keep production even. There are some zones that dont draw off 80 a year. We are trying to break up the rock near the horizontal well board. We do not see the designs we see. That is why it is still flat. All of the operators will start again in the next six months. Alix when you look at the next few years, you are retiring. 2011. Ld everything in what is going to be the next . Produce forng to the next hundred years. We have over 20,000 locations. We will drill for or 5000. Pioneer is left with a tremendous inventory. With 20,000 drilling locations, it is important not to diversify. Our economics are better. We have 80 oil, we pay the least royalty, zero crossed zero cost basis. There is no reason for us to go to delaware. Alix 85 of your output this year. It helps you when oil prices were at 26. Did you lose the ability to capture the upside . Threeway hedging. We have upside. We are getting 18 a barrel higher than whatever we received. We benefit from that in 2015, 2006. We are 15 hedged in 2017. Alix you have one of the highest valuations in the state. How much is m a speculations and how much is your actual Growth Profile . Zero on mn day. Alix really . The majors is a different question. Pioneer is trading at the same multiple. Jk company, they are trading at the same multiple. We can grow 15, 20, some of them are drawing 20 some of them are growing 25 a year. Alix we will talk more about mn day in our next segment. Your son, the ceo of Parsley Energy will join us on the direction of oil and shell energy. Guy one of the big stories of the day, a payroll number coming up. Krueger and fresh reaction from the white house. This is bloomberg. Guy this is bloomberg go. Gross on thell u. S. Payroll report. Alix back with us, the ceo of Pioneer National resources and his son. Oil is down almost 8 . Been on anve never interview before. Where is oil going to go . We could have a freeze between russia and opec. What happens to oil . I believe in not speculating and not answering that question. I think we will stay in the to 55. Om 45 we will be there until the emd of 2017. That is why i think Vladimir Putin is trying to get iran to bring to the fold. We are not in a february situation. Is the worst past us . It is. I think that was trader momentum. Rangeeve this is the new for a long time. If oil goes in the upper 50s, we are a victim of our own success. Chart with with a our growth rate. Alix are we at the trough of u. S. Production . We have added about 75 rigs. Two thirds of those have been the basin. It68 months, you will see grow again. Put you out ofia business, effectively. How did that make you feel . Which they did it before. They did it in the 1980s. We expected Something Like that to happen. We had some consultants tell us it was going to happen a couple months before. A 1. 3 billion equity offer back in 2014. They are fearful of what is going to happen. They are realizing too much oil came on over the last five years. On and nowl came they are trying to stabilize it. They are hurting, to bang. They are hurting, too. Otherhere is plenty of geological similarities that could be used around the world to deliver similar amounts of oil. What is the potential of this technology around the world . Fields inre similar argentina. We are fortunate. There are pipelines it built to the gulf of mexico and now expanded out to the delaware basin. Alix as you bring back the rigs over the next year, how many more people do you have to hire . The industry has lost a couple hundred thousand. Probably half a million people. Every time we bring a rigged people. At 250 not just the rigged, but all of the Service Companies tied to it. It is about 500 people per rigged. 250 people. It is important for the u. S. Economy. Alix if you get those guys back to drill your rig and operate your rig, how much more do you have to pay them to do that . Im sure i can get them cheaper guys. He permian they are getting a little antsy. They remember what their paycheck was two years ago. Alix we were talking about potential mn day. Do you feel like youre going to Going Forward . We have made one way 5 billion of acquisitions. We have been aggressive. The company is getting to a point we feel we have enough inventory and it is difficult to with lower returns than your current inventory. It is getting harder and harder, very competitive. You have a diverse portfolio company. They are buying more. Now, it is about 10 to 15 competitors. Alix your dad is going to be out of a job in january. Are you going to give him a job . He is going to be on the board at Pioneer National. That would be a conflict of interest. Alix you are still going to be the chairman of pioneer. You are a legend in your dynasty of shale oil. Are you going to pass that on and move and help them out . I have been giving him advice for the last three or four years and my advice to him is to keep a great Balance Sheet. Alix it is a pleasure to speak with you both. Thank you both. We will be right back. Guy what is moving around the world, let me show you what is happening. This is the story when it comes to most of the major asset classes. Dow jones futures flat. Everybody is sitting on their hands. Tse is up a decent amount. The dax not holding those gains. Assets the other quickly, oil, one of the big stories of the day. The dollar, waiting for the payroll number. Treasury yields are up a touch. We are waiting for the services number. My heart is beginning to beat faster as we wait for payroll. Pleasures been a chatting with you. Coming up, we have an allstar cast to preview and reaction to the jobs report. Arianrueger, mohammed al thefresh reaction from white house. This is bloomberg. Alix oneonone with putin. The excessive interview only on bloomberg. Vladimir putin blasting donald trump and Hillary Clinton for their campaign shock tactics, and the final threat. Todays of child report in the u. S. Is the final leg of the race as the fed weighs went to raise Interest Rates. Plus, bill gross reacts to the number after calling for two fed had expired early as march. Welcome to bloomberg. I am alix steel and joe weisenthal, like old times. Joe thank you for having me. Alix usually, we react to job stand afternoon but david west and the Jonathan Ferro are off today, so you could say the federal he wants the hike, the bar is low for that hurdle, or the fed really needs to see a 200 thousand plus number to think about pulling the trigger in september. Joe i think a lot of but the a symmetry, especially when the got that one bad jobs number that really threw off the fed and everyones projection for the year, so it speaks to the idea that we could definitely get a hike in september or this year or maybe december, but that a good number, while maybe solidifying that, a bad number would destroy that and perhaps really throw it off the table. In yesterdays eye is a lot of noise. Alix you can see that in equities, bonds, with the dollar, and the other question is about the jobs number, but the jobs picture has been ok in pretty good in the last couple of months, so is that the last box to check in front of the fed hike . Joe it seems like it. Folks zeroing in from the comments in jackson hole last week, basically saying that as long as the labor data is consistent with what they have seen and the outlook, that would perhaps justify a hike. The 80,000 could be threshold for possible hike and front and center would be whatever backup they see in yield and if any tip is actually bought when it comes to treasuries, so do they have any control over the yield curve over . Tom if is good, people think the rape is flattening and there is no hike, but for treasury buyers, it has been an amazing strategy. Alix coming up, the highlights to that interview with Vladimir Putin. Plus, an allstar cast, preview and reaction to todays job report. Alan krueger will help lead us up to the data and then mohamed andrian will be joining us reaction from the white house with jason furman, council of economic adviser chairman. Joe, you are looking at indices across the board. Joe lets look at how the markets are doing ahead of the jobs report. Lets look at the u. S. Markets here, very flat. Futures activity in the u. S. , you can see dow futures belly up and keep futures barely down. A little more active in europe and dep over 1 currently, so there is some gain. Modestly over the jobs report. Alix picking up on where you are leaving off, into that jobs around the highs of the session for the ftse, but it is what people are buying and health care is leading the charge. And you knowket, it, relatively stronger dollar across the board. The dollar yen now i do onemonth high but not a lot of ton of movement into that. In the commodity market, brent up by one point 4 and russian president Vladimir Putin saying he would like a freeze between russia and opec members and does think iran can be brought to the table with an exemption but nevertheless could be more the competition between iranians. The number you need to know, the backup in yield in japan, 30 year yield backing up 6. 5 basis points. The boj was in the market today to buy securities of 10 year or less and that is raising how they willt structure the Bond Buying Program Going Forward, added to the fact that you see lots of sellout as yields back up, so our kids in the Holding Pattern and less than 30 minutes away from that u. S. Jobs report. That could seal the deal for a rate hike this month, so joining us as alan krueger, professor of economics at Princeton University and former counsel of economic adviser chair. Thank you for joining us on this job stay, so that they question is what does the fed need to see in the labor day that to feel like it can resume cycle . Ing a lot of debate about the question, whether it is still more inflation, wages. In your mind, what are we missing in the economy . All thato not think much is missing. What they need to assurance that what we have see will continue. T is a broader sweep of things it is the jobs number, the topline number, how much is manufactured and how they are struggling, wage growth, and i think the chance that they will respond to todays report in the next meeting and a couple weeks from now september is remote, but i think it is building a case for moving later this year. Joe what about the inflation picture . Job data has been pretty solid, lets say, and someone says, no reason that all for the hike, no evidence that inflation is running hot. We have lots of risk going on, Inflation Expectations and surveys, marketbased surveys of compensation are very low. How do you read the inflation rates right now . Alan inflation is ready well anchored in the u. S. , but i think you have to realize that the feds actions are going to affect inflation with the bid of lag and it is an uncertain lag, so they like to get ahead of the curve for that reason. They do not want to be in a position where inflation is stronger than they expected and then they have to move freights up sharply, which could choke up recovery. Personally, i would like to see the fed move slower than they normally would because it is getting a little bit above and not as bad as the risk of deflation and many countries are but inng with deflation, general, the fed likes to get ahead of the curve because tools work with a lag. At this term,ook cpi burress is a fiveyearfive year to break even and some. Xpectations versus cpi expectations really embedded lower at 1. 6 . Does the fed need a wider range or increase their range of the inflation target in order to help expectations . Alan i would have liked to see holediscussion at jackson on the inflation target, which i would have thought with have been more useful than negative Interest Rates. Alix practical versus academia is what i am hearing. Alan i was trying to be more practical, actually. When the fed said they were shooting for 2 , they were pretty sure that target was not a feeling and i interpret that as an average, which means if you are below 2 , you can be about 2 for an amount of time. I would have liked to see more explicit discussions about how they bring that about. Of discussionrea that has come to focus after being dormant is Financial Stability. Chicago fed president talked about that in his speech earlier this week and this anxiety that, sure, we dont have many inflation concerns right now, but what about bubbles and Financial Assets . Do you see any Financial Stability risk of this long period of nominally low policy rates alan i think that policy rates . A risk. Think that is you try to push people but you do not want to overachieve and create a systematic type of bubble. I think we are in a must stronger position in the u. S. In the Financial System and our banks hold my capital, we do a better job surveilling the waterfront in terms of the Financial Sector, but we are concerned about things you do not know about. The housing sector is not overheated, which is an enormous market, and i think that is positive. I do worry about things taking place outside of the u. S. Alix like where . Alan europe. I but that stability of the financial future of europe. They do not have deposited insurance worldwide insurance, and i think the European Monetary Union has a long way to go the for the have all the tools for a well functioning Monetary Union and what they would have. Alix we have jobs, inflation, and adjustability and the fourth prong is labor. We look for how much like there is in the market. What is your work telling you . Alan i have not been expecting much of the bounceback and labor force dissipation. Alix a little counterintuitive, right . Alan when they leave the go to otherhey pursuits. Summer attire, go back to school, and we have been seeing that last factor. If you look at the Bigger Picture of the u. S. , we are getting older. Older people are less likely to several we have had different trends cutting through the data, we have had workers leaving the word leaving the labor force and that has been going on for men for many years and for women, that started 15 years ago. I have been setting what has been going on with the men. 12 of men 25 to 54 are not working under out of the labor force. A surprisingly large number, about 35 have a significant disability. 20 has difficulty running errands. 13 has difficulty concentrating or remembering things. Need to focus for this group to think about how we can look at the labor force. To look athat has how to go to the labor cost index. We are looking at the index in this what the fed looks at when it comes to wages. You can see how we have not really been able to boost inflation, yes, ok, slight rise, but the question is how much more juice is there . Joe you mentioned the percentage of men out of the workforce and the various contributors to that. The policy response to that, is that outside of what the fed is capable of and where would we see the best approach to dealing with some of these issues . Alan it is possible the Affordable Care act could help. People who have had Health Issues and they have neglected to go to checkups because they could not afford to see a doctor and now we have universal care insurance, in the long term, that could help. The economy run, brought about through fed actions could help. I think it is quite limited in the types of obstacles that workers are added the labor force are facing. Alix you are sticking with us the next hour. Alan krueger. Lets get an update on headlines outside of the business world. Emma has first word news. Putin is notr taking sides in the u. S. President ial election but does not care for the tactics of Hillary Clinton or donald trump. He spoke with bloombergs editor in chief in an exclusive interview. President putin . before [indiscernible] the other candidate. Their popular each in their own way. They are smart, very smart people. They understand which buttons you need to press to get the supporters of the United States to listen to them. Emma tune in to bloomberg all day for our exclusive interview with Vladimir Putin and do not miss our special report on monday at 12 00 p. M. Eastern. The first hurricane to start florida since 2005 has weakened to a tropical storm. Hermine brought high winds, heavy rain and massive flooding. Tens of thousands of people in georgia are without power and the storm is expected to move into the carolinas tonight. After losing the brexit referendum, they call themselves open britains, and the departure could change as little as possible. Says fishermen in the union market and have influence of it regulatory decisionmaking. Global news powered by journalists and analysts in more than 120 countries. Itx thank you rick perry coming up, counting down to the job report. Thank you. Coming up, counting down to the job report. Andyield sees a faster rate high faster pace and rate hike this year. This is bloomberg. Alix this is bloomberg. The equities are trading. 15 minutes from the jobs number. Teachers seeing risk being taken on in europe. Is ae treasury market, backup in yield, a little bit of selling across the curve as it looking at thend market into the jobs number and still a stronger dollar number. Dollaryen at the onemonth high. The question then, what happens to yield today after that job number . Priya misra thinks he could see a backup from 85 to 90 basis points if we do see the fed tightening cycle. Alan krueger, economic professor, still with us. On that twoyear, what would have to happen from the fed and jobs numbers . Priya we have to see a number of 200 or so for september to be and at the fed hikes in september, then it raises the question of what is the rate of pike . If you look at pricing over the next year, we have less the one rate price hiked income so that the federal hike in september, does the fed end up hiking like they hike over the next year . That is what will make that front end go higher. I would say that [indiscernible] is more important for the twoyear treasure and the front and. Joe you mention the front end of the yield curve, but im curious, what sensitivity do you see to the fed from the long end of the yield curve . Can the fed move the long end and what would it take to get this long term trends . i am looking at five or 10 basis points. It is u. S. Interest rates are so high yielding lend you compare it to Global Development bonding, so when you look at where bonds are, u. S. 10 year at 160 will look attractive but it the fed does hike in september or november, you can get a little bit of pressure and what changes the trend and what makes me bearish on the Treasury Curve . I think it will go back to global bonding. If we get the boj talking about deepening their purchases, if we talk about the ecb potentially stopping qe, then we are talking about a general increase in longterm Interest Rates and that does worry me. I think the other thing to think about is inflation risk, but look at when my favorite charts. With Inflation Expectations have been lower, to not worry about the overshoot inflation point and not worry about that. You still get stimulus, a general increase in global bonding and that could change the trend for the u. S. Longterm. Alix we talked a little bit about that today. If you take a look at the japanese thirtyyear basis, backing up because theyre concerned the boj will buy differently when in the market shorterterm versus longerterm debt. Needs to of shift happen and how dramatic doesnt have to be to rethink the global rate stage . Think you need stimulus to change our view on productivity and this concept, so i think if all that you get is stepping away, you can get the long and global bond, but ultimately, it will come back down to growth. Lacklustering about growth, low point of the hiking cycle and i think that increase in rates will be more limited, so what i am hoping for is fromlly, there is a shift Monetary Policy to fiscal policy. If you get Something Like that and you get this code policy focused on infrastructure other ideas and it raises productivity, do we look at generally much higher longterm Interest Rates. R, yourofessor kruege have heard the amount of discussion about the eventual rate of interest and the idea that it is extraordinarily low and could potentially cap where rates could go in any cycle. Where do you see that . Do you see this on rates could go in the hiking cycle . Alan as an economics professor, i love to focus on allstar. [laughter] shoulds me think that we think more carefully and how we choose notation and models. I do find that the lackluster productivity growth that we have seen could indeed believe to our real Interest Rates in the longer term, so i think we agree with what priya said, we need to see more growth and being driven by productivity growth. Alix take a look at what the fed looks at it. If they want to control the long end of the curve, how do they do that . There are some that say they have to sell their higher and that. Think they will unwind the portfolio slowly and that minimizes risk treasury and that minimizes the risk of the financial market, so my guess is that they will make the decision sometime down the road when they roll over the portfolio and how they unwind it. They were coauthors talking about how unwinding the portfolio could be done in such a way to reduce risk and Financial Markets and i thought it was a fascinating idea, so all of that will be on the table but i think that is a long way off. , thank you somisra much. Alan krueger, you are sticking with us. We are seeing twoyear a little lower and buying coming into that jobs number. About eight minutes away from the u. S. Jobs report. We will break down that number and reaction from bill gross of Janus Capital. This is bloomberg. Alix this is bloomberg. I am alix steel. We look at what key banks are looking at. Jeffreys managing director joins us, alan krueger still with us, brad, it is about the dollar. In august, it ended up in the last day months but is there a risk and more Downside Potential in the dollar on a weaker number than upside honest on the number . Brad we have come a long way since the jackson hole last weekend and the comments that drove the dollar this week, so we have but their amount of dollar rally this week and the risk is probably the downside. We saw little bit of that yesterday on the weaker ism report and it took steam out of the dollar. You could see further unwinding of that trade. Joe what is your view of the yen . We have a review of the boj policy framework, coming up, and it is a proxy for the risk and risk off, but we do see the yen going . Brad if you get a decent number today and surprise north of 200 or 225, you could see the dollar yen rally and the Dollar Strength of come back and Great Expectations for september will increase and september as well. If we get something sort of in the middle of the road around 180, youll see the dollar yen 102,s back, probably about 150, and all eyes will be on the boj and that will be the bigger event for the end. Alix if you take a look at dollaryen at 105, does the fed say, that takes us off the table for september . Parley and that negative feedback loop when it comes to the dollar . Does that take us up the negative feedback loop when it comes to the dollar . Alan i think that is a little super september. I think the fed released the viewer the Research Presented and it says 200 and up without much downward pressure on inflation the u. S. Because most International Transactions take place in u. S. Dollars. It has affected many bashing and other expert factors but i think that is largely taken into and itand in the base has to pretty good sense of how the stronger dollar will affect the u. S. Economy at this point. Joe i wanted to get back to what you said in the last segment about we productivity growth, the source of a lot of debate as to what is the underlying cause, is there some kind of technological reason . Demographics . A phenomenon associated with the week recovery cycle . How would you wait the different factors behind this crucial question . Alan excellent question. I would add another factor, the financial crisis, plus, investments of slowdown. In japan, uncertainty investment has been week. Have less we productivity growth, it can slow down but the other half is time to do a technological progress. Although it may be the gdp down the road will raise that could beand research and development and i do not fully bind to the argument that all of our great inventions are behind us. I think there many Network Externalities and having people hook up and there are costs associated with that which main benefits do not show up in output graduate. The way productivity works is when it takes a longterm to determine what goes with productivity growth and a while before he had productivity growth slowdown in the 1970s and it will be appreciated and had the acceleration the late 1990s, so it may be that this is a short period for new era of productivity growth. Alix bringing this back to fx, we are seeing the dollar at the highs of the session and seemed volatility pick up on on major currencies, the volatility index between that 150 day average. You expected to pick up at 831 . I think volatility is cheap and pricing, especially for the yen and it is trading through the volatility recently. Elevatedlevant comfort district, but it is still pretty cheap. We have ecb coming up in the incoming week, so volatility is cheap in my view. Alix brad, thank you for joining us. Jeffreys managing director of fx, thank you. Talking a lot about employment but wages that we have not touched on. Expected toaverages rise 2. 5 , a slight down to it a slight down to it, but generally been upward direction and you could make an argument that this is much more important than the headline jobs number or the Unemployment Rates in terms of inflation and what that means for the fed. Alix we do want to update you on where markets are trading, Little Movement into the number and the twoyear yield falling, some fine coming in on the short end of the curve. Relatively flat and you still have a rally over in europe. At the highs of the session in the fx market, you have the dollar moving lower ahead of the relief. Not a lot of traders taking on risk ahead of the number. Now to erik for the number. Erik 151,000 jobs, the increase in on foreign payrolls last month and the Unemployment Rate steady at 9. 4 and annual wage wage growth slower 2. 4 and it adds up to a disappointing jobs report for the month of august. Apart from a disaster, but falling short of expectations by enough to throw a rate hike at the feds next meeting into doubt. That is the takehome message from the Labor Department this morning. Remember, with what janet yellen said in jackson hole, the fed needs to see data that confirms its outlook, and this report might not be enough to get that that point. It missed expectations by thomas 30,000. Plus, economist we surveyed up bloomberg were looking for a lower Unemployment Rates and faster wage growth. That being said, many of the economists we have been speaking to for months have been saying that there is just no way the economy can continue creating jobs at the same pace it did in the month of june and july. Speaking of june and july, there were revisions, both of those numbers, but then that change is not meaningful at 1000 but then that change is not the net change is not meaningful at in on this, we have 150,000. A few more key pieces of data. Household employment up by 97,000, a significant slowdown from what we saw in july. The Labor Participation rate is an at 622 point percent and that underemployment rate also unchanged at 9. 7 and manufacturing payrolls over closely watched in this president ial race down by 14,000. The big takehome message, this jobs report is disappointing if you measure it against economist expectations. An increase in nonforeign payrolls of 151000 and Unemployment Rate of 4. 9 and wage growth of two point 4 . The question is, will it be enough to justify a rate hike in september . That is the question this morning. Back to you in new york. Alix thank you for breaking down those numbers. The market telling your clearly that they are not expecting a rate hike. If you take a look at the twoyear yield and buying coming into the curb in the dollar off, dollaryen moving lower, equities moving higher. Joe equities moving higher is interesting. It was a weak jobs report and pushes back expectations of a rate hike but not so that we are falling off the table and panicking, so it seems that markets are pricing in that goldilocks think of not so bad and not so great. Alix thats a great news is ok news. Now we want to go to tom keene speaking with bill gross. Bloombergw welcome radio and Bloomberg Television worldwide. David gura and tom keene and with us, from Janus Capital and a spit the one your track record, one william gross. Hill, you are generating almost equity like returns. That . E you doing bill it takes a little bit of leverage, does it not . Or a lot of luck. In this case, the unconstrained fund are the most unconstrained funds and there are plenty of hedge funds, so you have a istle leverage and this clever to the one, so you can take advantage of the low and producedes equity returns. That is basically what bridgwater suggests. Am within that, it you have work within the fed, does this job support today, with yields in a little bit, with a young stronger, does this signal the fed that they need to move in november . R or do wait for the end of the year december or not . I heard you and david talking about it in the start and started to gauge it initially. Tom i agree. Bill we are arguing about the angels on the head of apin, here, and this is about little below the six month and 12 month average and job creation, but i think september is on. I do not think it is 100 on but i think it is close. I think janet yellen told us, not just at jackson hole, but other places, that she looks at jobs and that gdp is not on the top of progress and if these types of jobs do not do it, im not quite sure what does. Tom david gura, three months moving average, 232,000, that is a general missed number. Six months a little less at 175,000, but the one year moving average, 2004000 nonforeign payroll. David after the last jobs number, 255,000, you said that was good job growth but not satisfied it would lead to a september hike. What has changed its calculus and made you think september could be on the table . Bill i think fed speak. I listen to stand fisher and basically, at jackson hole, they said that if things continue as they are continuing, yes, you just pointed out the 200,000 as the 12 month average on jobs, but i would say that she would think this is a continuation of a positive trend that promotes the 25 basis point hike. It has almost been one year. I think that is a gradual type of slope. I think fisher seconded her motion, so to speak, and maybe even upped it in terms of his hawkishness, so those to drive it and i think september is one and done for the year. Tom i want to head to something that i think is absolutely crucial, which is to suggest that the fed and economists worldwide are ignoring the financial and Banking System . With all the challenges, particularly in european banking, does the fed have to , thein negative rates central bank actions, with the somewhat desperation and financial instability of our Banking System . Bill i was wondering when you would i was hoping you would ask that question. There is a nice article in the financial times, but i have been on this before and so have you. I suspect at jackson hole, or they talked about monetary challenges and new modeling theys Going Forward, that did not really look at the effect on the financial economy and they did not in 2006 and 2007 and 2008. They did not know what was going and they cannot read minsky, and he had written 10 years or 20 years before that that rio economy and financial economy are connected. So now you that the real economy and financial economy are connected to its a a question is the effect on the financial economy. In terms of real economy, there are longterm growth assumptions and they have lowered the star, which is basically longterm real neutral Interest Rates, etc. , etc. , but they did not investigate the effect of our star on financial asset prices. We know that probably it affects bond prices, but how does it affect equity risk premium and equity and highyield bond spreads . No discussion whatsoever of god in terms of potential asset bubbles from these new no discussion whatsoever of those in terms of potential asset bubbles. Absolutely critical, dominic from Deutsche Bank is adamant that this is a central tok regime that will shift discussion of financial instability. When you are on your desk at janus and you have your three bloombergs and a traitor fired up, looking at Financial Systems, does bill gross suggest we will see financial instability in the next year . Is a well, i think it definite possibility because we have growing leverage. Not necessarily lets be fair, on the corporate side, yes but no substantial leverage in china, and china is an economic engine to the extent that Financial Leverage in china at some point presents a problem and even the chinese officials suggest that that is a possibility that leverages high. Was an 20072008, it subprime, so to speak, that broke the camels back. Chinas leverages huge and in our miss compared to the subprime, so i would suggest the financial moment as possible because wherever there is leverage and had leverage, and historically, high leverage, there is the possibility of a moment and minsky pointed that out. He says instability leads to instability and we have stability now, but there is a definite question as to whether a negativetes and camp can produce instability in asset prices, therefore, the potential popping of bubbles. David what about favors . Fisher was asked about the Financial Sector and i remember vividly that stan fisher said in economics, they were tradeoffs. To what degree do you think the fomc is paying attention to how they are suffering right now . Bill they mentioned it, david, and i am stunned by that. It says that favors will have to wait and yellen said favors would have to wait, and i suppose in the ordinary scheme of things, perhaps it means lets basically get the economy on the ship Forward Movement and you can start saving two or three years now with more attractive Interest Rates. Tom lets come back with bill and well continue our discussion with futures advancing off that jobs report, up five, the 10 year yield in line tom keene was disputed bill gross. Alan krueger still with us. We will talk much more about the indepth jobs number. What was your biggest take away . Alan i think it was a bit disappointed. When i take away is that the workweek fell from 34. 4 hours a week to 34. 3. If you do the math, that is more. Mportant than a headline given the u. S. Demographic, we are growing at a rate that is fast enough to look at the gradually over time, so i do not see [indiscernible] is less likely the federal act in september, which i thought was a low probability to start with. I do think there is enough gear to keep it on a path to raise rates at the end of the year, assuming that we continue to amass the rate at the end of the year. Alix with the goldie lock basis, that down three points and we will dig deeper into todays job reports and look at how the market digest the numbers. Plus, we will have more with Janus Capitals bill gross. This is bloomberg. Alix this is bloomberg. I am the hewlettpackard enterprise greenroom. Coming up, david wu. Joe this is bloomberg. I am joe weisenthal. Lets look at how markets react to the jobs report. If you look at equities, pretty good. U. S. Futures higher, not dramatically but up five points, solid gains in europe, the u. S. The u. K. Ftse up. The dax up nearly 0. 4 , but if we look at the fixed income side of the assets, you can see the different reaction, twoyear year yield down to the lower and you see the market reacting essentially to this idea that the jobs report may not have been stomping up to lock in that september rate hike and maybe not even december, said the markets pushing forward and pushing out expectations of the rate hike and we are seeing , so gain today in brent oil the common theme today, not terrible day the, easier policy. Alix still at this is alan krueger and former counsel economic adviser chair. You highlighted the fact that work hours fell in that stood out. Why was that important . Alan it says there is a little bit less demand than expected and that adds to the top line being weak, but one has to question since it is one month before volatilitys in numbers and adjusting and the forecasters are a little bit overly optimistic and i think this is too far out of line and given the sizew of revisions are monthtomonth. Alix we will be taking in much deeper in the jobs numbers. Coming up next, we continue our commerce issue with Janus Capitals bill gross. This is bloomberg. You continue our conversation with bill gross. This is uber. This is bloomberg. Alix we go back to tom keene on bloomberg radio, speaking with no gross. Speaker at bill gross. With bill gross of Janus Capital. Mr. Gross has been great to be with us for 1400 38 minutes or at least until he gets his decision right. [laughter] edge, e on the bill a broken watch. Tom Great Respect for that. This harkens back many decades josephouth and with being right twice a day. Bill gross, i would suggest you have been relatively nuanced in your uproar about Central Banks in general and a limited toolkit ,o solve real economy affects the heart of that and your heart and looking at the number, 1438 minutes how you need fiscal policy to help you out. Do you see any indication that the fiscal authorities will come to the rescue . Bill not yet. There are many other advocates now relative to one year or two , so i think the mood is beginning to shift politically and it is what we have to worry about and i suppose we will see that to some butnt in the u. S. Election, fiscal spending, whether it be for him for social, which everyone supports, or other types of spending, i think it is all of thatd we Government Spending perhaps is not as productive as private spending, but when it leaves a hole from the 1930s and 1940s, it is up to the government to fill that hole, and i think ,egislation, like in germany where they basically mandated a balanced budget and a shift of of the European Countries in that direction, it basically is harder to reverse, and i think ultimately, if Monetary Policy is basically played out, and i think it is, to think rates should be higher and not lower, then fiscal spending and hopefully productive spending bills and some of the gaps. As i pointed out with the new normal, there are structural ongrams that will promote the rate Going Forward that is unavoidable. David lets talk about growth which he talked about with Erik Schatzker. U. N. John both writing and talking about economics, but you said that practice cannot buy you a hole in one. You look at janet yellen as a forecaster, perhaps one of the most practiced, and just to be concerned about where she sees growth at 1. 2 year over year. Hassan pathetically to her as she is weighing that and she and rise . Ay of rate weiss because i sympathetic know societies dependent on models. Ink bill i am sympathetic because i know Society Depends on models. I think there are 13 trillion worth of sovereign debt in the negative camp and that really isnt an asset but the liability for those who hold those particular pieces of paper and that the rules, perhaps, change, and we see that with the newtonian physics in the law of einsteinects, which initiated camusso 0 Interest Rates can change things and change models and i do not think because that is a subjective type of thought and historical modeling in five years or six years, and i think it is difficult with them and i think we need new thinking and that is supposedly with the jackson hole was about but i saw little of that. David did you talk about expanding that toolkit often . Going back to jackson hole and the conversations about negative rates there, it did not come up and Janet Yellens speech and stan fisher told tom that he was watching it from theoretical advantage. When you look back at jackson hole and what you heard over the last few weeks from policymakers, what is your sense of how they way negative Interest Rates and what role that plays in the toolkit, if any . Bill i do not think they do. Some, such as japan, are beginning to suggest that maybe negative Interest Rates and negative type of affects us and i do not think they do. You mentioned kevin. Tohink he had the courage challenge that they believe lower in the lower Interest Rates and negative Interest Rates elevate asset prices, which in terms of stimulant Economic Growth and inflation, and he said in his oped, the fed needs new thinking. Type ofthat williams proposals, or you increase the to 4 from to 3 2 , he said they were bandaids and said we really need some new thinking. The new thinking is what we have been talking about for six months to 12 months and that this Interest Rate has a negative effect and that perhaps it is more gradual than what they think about. I want to bring it back to Bond Management and investment. No one has been smarter on this smarteruniversity on this then boston university. He was way up front on a reduced real rates and nominal compression. How are you going to manage, how do institution portfolios, like Pension Funds with longterm obligations manage, and how do our viewers and listeners manage given from lower to longer, longer, longer . How do we manage our way through it . The new worldpt tom. Basically, up until now, the fight has been on and the direction of the fight and the temper of the fight has been to increase risk and increase leverage in order to maintain a semblance of this historical return. It is in this sort of pension fund and what they had done. Basically, this reduces it by a little bit, by 25 basis points and their assumption in terms of longterm return and what does that do for them . It basically does little and does not force them to make additional contributions, it does not force the state or the entity to increase taxes and filled the hole, so that, when someone is there for, defer, defer, i think what Pension Funds, investors have to do is accept that it is a new world base their taxation and other policies on the fact that it is not the 10 world but before percent, 5 world at best. Alix that was bill gross and tom keene on bloomberg radio. A quick check on the markets, s p 500 futures around the high of the session. Ftse continues to climb higher but it is really in the fx and fixed income market where you see the most moves. You have twoyear yields are those of the session and now down by only one or two basis points. We were off by three basis points of one dollar, also advancing off the lows, so relating. Coming up, david woo joins us. Alix we are 30 minutes from the opening bell in new york. Happy friday and happy jobs friday. This is bloomberg. I am alix steel with joe weisenthal. David westin on assignment and jon ferro on vacation. Obs added in august less than estimate but markets having an instant reaction. Matt we saw that drop in the shortterm yield. Been comingey have in a little bit and still not back to where they were. Sending out in an email, that maybe this report should be viewed as a beat in the sense that everyone was talking about and there isfect in effect with the payrolls week that might explain the week and perhapsngs after adjustments, it was not that bad. Not much different than what professor alan krueger said. Alix from that, it is barely off. Coming up, jobs friday. We will drill down with alan krueger, princeton professor of economics, and Mohamed Elerian and bank of americas head of rates and foreignexchange research, david woo, and chief white house economist jason furman, so heavyweights to weigh in. Joe absolutely. Quick check of the markets board, looking at equities. As you can see, continued gains and reversal and rates. Up 1. 32 , leading the way. Alix taking a look at the stocks, we were saying defense but the ftse run the highs of the session. In the Foreign Exchange market, slightly weaker dollar. We were lower on that job number, but now hearing some of those losses as well. A little bit weaker in the fx market, and commodities, it continues to be a higher print story and that is not on the jobs number but more on president Vladimir Putin talking about it freeze for opec in russia. Although, a weaker dollar helping commodities grind higher. In the sovereign markets, the big highlight for me, not jobs related, the back of the neil to jgb upe thirtyyear and 6. 5 basis points. The boj in the market, buying bonds with tenure maturity or less, raising questions about the boj wand buying program. We will tackle that with david woo, but in the u. S. , a weaker yield. We are off the suggestion that they suggest that jobs number. For more, we have Abigail Doolittle in new york and mark barton joins us in london. Lets start with individual movers. Lululemon front and center. Abigail lululemon shares plunging after the company delivered what is the bears were looking for. Bearishthere is a high shortage of 18 and they cite the fact that they missed the Second Quarter cost and provided a lack of visibility and did not raise onions, they recommend buying the share. They say the longterm story is intact and we have other analyst defending the shares on the margin. As for the big mess, bloomberg intelligent analyst say it is about growing traffic and a slowdown they believe will extend into the Third Quarter. Also lower in the premarket, amarillo. Stocked on more than 1. 6 . This is the chipmaker after they beat the adjusted earnings by 42 , but what could be disappointing investors here is the gross margin for the Third Quarter and the guidance is much lower than what was reported for the Second Quarter. Interestingly, we do have the cfo side weakness from gopro, weighing on the results. That stock not trading yet. However, as for the guidance, we do have matt saying that he conservative, by the stock, and sees more than 20 upside potential for the shares of ambarella. Alix thank you. Mark barton joining us from london. Did that change in the last 30 minutes . Mark it has changed because what we are seeing is that yes, utilities at the top and basic resort rising, oil and gas rising. Every Industry Group after the jobs report and now the stoxx 600 is at the highest level since may 31. Two weeks of gains. That has not happened since july. This is the decline. Companies, callaway executive says there is little chance his company will be interested in the assets from last august and caps off the offset high and Guggenheim Partners and nike is inching out of golf, as well, and the big day to beads, once again out of the u. K. , construction. We are below 50, but the increase was the biggest in 2013. Regress from 49. 9 to 49. 2 and economists expected 46. 3. During manufacturing today and that highlights the missourians of the u. K. Economy postbrexit. On monday, the pound index rises for third week. Because of all the data that is beating estimates. This is the best run for the pound index, which is the pound against the basket of seven as i said, 27 and the stock market is at the highest since the end of may. Everything coming together. Alix for now. Thank you, mark barton. Now he want to get to Erik Schatzker at the Labor Department among the jobs report. Bachus to the headlines. Erik walk us to the headlines. Erik at the risk of sounding repetitive, but for those tuning in, here are the highlights increase of 151,000 in nonforeign payrolls, versus expectation of 180,000. Unemployment rate of 4. 9 percent, and will create growth of 2. 4 and there were revisions of the jobs numbers for july and june, but if you add them together, they are negligible. Bottom line, a disappointment and economists anticipated that it would slow a june or july but not quite this much. Alix thank you. Erik schatzker from the Labor Department to set the stage for jobsgging deeper into numbers. Alan krueger, princeton professor of economics, also joining us and Mohamed Elerian and Bloomberg View columnist. Joe what is your first reaction . Mohamed date is a mixed report, joe. Clearly, job creation, more importantly in my eyes, is the way growth of the way to growth, but i would caution be careful because it signals that there is not much lacks left in the labor market, so thisll put the fed in a tricky position when they meet in september. Alix if you take a look at market reaction, a saw the s p 500 around highs of the session of premarket and a decline in yield off the lows and declining dollar off the lows. Is this really ago by risk job number . Slightlywhat it is is lower expectations of the fed hike is not materially so. I think the market made sense. Yields came down notably when they looked at the headline numbers, but when they looked at the content of the report overall, they went slightly backup. This is going to ultimately come down to one fundamental issue, out where it are fed officials about the Collateral Damage and unintended consequences of a protracted period of low Interest Rates . If they are as worried as i am, then this report is a green light to hike kerry did theyre not worried, they will wait. Joe expand on that further because we got a piece from chicago fed resident earlier this week and they said the long period of low nominal rates was not much of a concern to Financial Stability, in part because she saw the neutral rate as low. Explain why you see this protracted period of low rate being a concern that the fed or being a period that the fed should be good to get out of. Excessivee see risktaking by nonbanks. We are seeing credit and debt going up. Were seeing the erosion of the institutional basis for financiallongerterm protective services to the population with instruments of pensions, so the longer this person us the greater the damage to the Financial System and it ultimately underpins high inclusive growth, and the higher the risk of Financial Stability down the road. If you put a financial perspective on this, you start worrying about future Economic Growth and the tradeoff between drinking growth from the future to the day and tradeoff in terms of what that does to Financial Stability down the road. Alan do you think the fed will signal if it will raise rates in the september meeting . Will we hear more from them than what we heard at jackson hole . Mohamed i think you are bound to hear more, and i think this will be a fascinating this question inside the room. We are not going to get a good feel for what is going on, but as i said, this report is not Strong Enough for that unambiguous signal for hike, but it is Strong Enough to make a credible case for hike, so this is going to be a fascinating discussion and i suspect, ultimately, it will come down to not just as nowadays but how concerned are people about Collateral Damage and unintended consequences. Did deeper numbers, 151,000, but if you look over the last 10 years, the average over eight of the years, it we sell a vision upward of 81 thousand. Is it possible in october september we get a revision to 235,000 jobs for august . Alan that is possible. I think this report is a big yawn. There is not that much news. I think that is mostly have reacted to it. These numbers are very volatile. I will never forget when i started to work for the 2000 11, theaugust reported job growth was zero. Zero, no jobs and all. Now, it is over 100,000, so their big revisions and it does change the view of the economy. Joe you mention a big yawn because the big games seem to be ,ack of concern about inflation and no expectation i mean, septemberdecember, but no expectations for anything rapid on the rate hike front and it does not feel like this changes either of those. Game this is not a changer. I think what mohammed said his right. If one is worried about financial instability because of low rates, this is not going to give you reason to worry. If you think it is not the highest concern and your more worried about deflation risks, and the growth, thisll also not give you much caused the change of you. Alix it has been a pleasure to have you on jobs friday. Alan krueger, thanks. Mohamed elerian, you are sticking with us. More market reaction, coming up. For an update on Business News outside, we go to emma. Economic sanctions limiting trade between russia, the u. S. And the eu and now Vladimir Putin is looking to china. He spoke with john nickel creek in an excessive spoke with john in an extensive interview. President putin we are working today on joint space programs, developing cost production of the heavy helicopter. Airplane. King on an we are incorporating machine building, i street rail highspeed rail, processing, Atomic Energy we have argued built a Nuclear Power plants. Emma putin will be in china for the g20 meeting this weekend. Came ashore earlier today, bringing high wind, massive flooding and heavy rain. Tens and thousands of people in georgia are without power and the storm is expected to move to the carolinas tonight. The acting Prime Minister of spain gets another chance today to win parliaments approval to form another government. Maybe a long shot who lost for him, who lost the confidence vote on wednesday and was not able to compromise to work with the socialist party. If he fails again today, spain could be closer to holding a third election this december. Global news powered by more than 2600 journalists in more than 120 countries. This is bloomberg. Alix thank you. Still ahead, the good, the bad, the ugly as a result of central bank stimulus, and much more of our exclusive interview with russian president Vladimir Putin and when he says about allegations that russia is meddling in the u. S. President ial race. This is bloomberg. Ix this is bloomberg it is the chart of the morning. What happens to the two year yield on the job number, and immediate spike down and sobbed line coming to the treasury market and the reaction seems to be there will be no rate hike on the jobs number, but then that yield up and now and changed, well off the lows of the session as the market three rates their rate expectations. Also with us in irvine, california, Mohamed Elerian. This chart i found to be by theting as we see any seams and it seems to be that is the case. Does that wind up pretending that we will have a rate hike sooner and the market will continue to relate . Mohamed it speaks to the fact that the report is more ambiguous they were the headline number suggests. Add to that what they said about large revisions to august historically in the market mis realizing this report does not mean that a fed rate hike is completely off the table for september. I think what you see makes sense. There is not much data between now and september 20 and 21st, so i will go back to this. It will be a really, really quick judgment call by the fomc. Days, we have seen the extraordinarily high level of correlation depending on how you measure it between risk assets and treasuries, things that you called safety assets, how does an investor deal with the situation in which there is such a high level of cross that the correlation and getting diversity in a portfolio by traditional measures as it is difficult . Mohamed it is, and this is a major problem. It is not the only one, so when Central Banks get involved in the functioning of markets, down, and wheny correlations are way down and not as productive both i mean, the even change over time it is hard to use ever suffocation as a sufficient condition with litigation, but the bottom line is that Risk Mitigation requires a higher level of portfolios than it has in the past. Alix that raises an interesting question of how much the fed can wind up control of the yield curve in any capacity when you have four and an private buyers well, into the market, as so can yields diverge if the fed is able to divert your mother Central Banks . Mohamed they can diverge at the short end of the yield curve. They will have much more difficult to diverging at the longer and. At the longer and one of the charts to put up is the difference between the 10 year German Government bond and the tenure Government Bond in the u. S. This has been a long and diverse period. Why . Because the Global Market for bonds is truly global. Other thing i am glad you. 2 and the audience should Pay Attention is what is happening on the japanese yield side glad you are paying attention and audience should Pay Attention is what is happening in the japanese yield side. It is getting close to the line that separates effectiveness from ineffectiveness and from being counter productive. Joe where does the boj go from here . The measures have long been an unconventional territory and if they are no longer effective and Economic Performance is still not to their desired goals, what does the central bank to . Do . Mohamed it does with other Central Banks have to do, which is go to the government, go to parliament and have a frank and open discussion saying that unless we pivot from excessive reliance on Central Banks to a more comprehensive policy approach that involves four elements, in particular, we are going to get the worst of all worlds. We are going to get the growth get no growth and the risk of Financial Stability down the road, so the bank of japan needs politician to step up to the plate, but so do other Central Banks. It seems conceivable that we could get some sort of handoff in policy in japan. What about in the u. S. . Eurozone, where the roles precluded what happens to an economy in those scenarios, where the handoff is really hard to see . Mohamed it is hard to see, not because this is an engineering problem. Most people agree on what is needed in the handoff. This is a political problem. It is my notion of the t junction, the road that we are on, in which Central Banks have succeeded in boosting asset prices and repressing Financial Stability, that road comes to an end within the next two years to three years. But what comes thereafter ms. Still uncertain. It is not predestined, that is why it is a t. If growing pressure puts the politicians in a better place to act, then we could transition to higher growth and genuine Financial Stability. However, if the political system continues to be what it is, the low growth will yield to periodic recessions and artificial Financial Stability and it will lead to a instead the unsettling financial disorder. That is how the world is ahead of us for the next two years to three years. Alix part of that has been the story of emerging markets, not suffering from the same dire circumstance in terms of growth as developed markets. Earlier, we spoke to Michael Lawson tom, templeton level macro cio to get his take on emerging markets and headwinds facing them. This into latin america and this is over the course of the last year. We sold the last of our positions in ireland, the last of our positions and hungry, not because returned negative but because they performed well and reached our price targets and through the price targets, neri redeployed capital in places like resume, a shift from europe into latin america. He went on to explain that the developed markets held all diverse, in part because of what you are talking about, and it was emerging markets in a much better place to invest. Mohamed a few months ago, emerging markets are much more attractive, but what he is talking about is what makes emerging markets overshoot on the way down and overshoot on the way up, and that is the notion of the global bond fund, a crossover investor coming into the asset class, when it looks ofractive, and lots and lots massive inflows in the last weeks, pushing asset prices the on fundamentals, and then you get the reverse. If you invest in emerging markets, you have to have a taxable element to it because these crossover investors are risk investors and they tend to contribute to overshoot on the up and down, and that is why dedicated funds tend to do better than the crossover of investor and emergingmarket world. Alix great insight. We appreciate your time. , we will havean much more on how markets are reacting to the jobs report. You are looking at it s p 500 futures trading relatively higher, up i about 10 points, the dow jones up by 87 points about seven minutes into the trade of the open on this is bloomberg. Alix five minutes away from the opening bell on this jobs friday. This is bloomberg. Goldilocks, this seems to been the goldilocks report. Joe definitely in the sense that it is not so that toy but not so good to accelerate the rate hike and also the common theme, not a game changer in any real sense. Similar idea but he doesnt really change the fact that rate hikes, whenever they hike, will be a long and slow process. Market,eing that in the futures higher into the open and you also see a twoyear yield intonged after the rally the yield market. Now, relatively flat across the board. The open is two minutes away. This is bloomberg. Oe this is bloomberg go lets get a look at how the markets are doing as we go to the opening bell in the wake of the jobs report. A lot of green. When we look at equities coming u. S. Futures continues to levitate free market does market. Performances in europe with the dax up nearly 1 . On the rate side of things, very quiet at one point the twoyear yield had dropped sharply and now flat. Oil over 2 . Lets look at where stocks are, opening for trading. Alix it is higher across the stream, a relative game in the s p, up 4 10 of 1 and similar for the dow, the nasdaq up by a half a percent. Futures, a rally starting higher. As big of the job numbers and continuing higher. , jpmorgan,tor citigroup, bank of america sensitive to the rates. If you have a backup in yields, if the fed hikes, better for the banks. A mixed picture on the day cometh twoyear yields lower as you saw buying but now unchanged. The world implied probability of a rate hike 26 in september versus 34 yesterday. Uncertainty in the bank stocks. Watching verifone, down huge, ofn 70 , most top customers the System Company are retail and retail has been week so the company cutting a fullyear Earnings Guidance by about . 20. Carnival having a difficult day, down over 3 , Morgan Stanley forlighting the rising risk this company, saying travel agent checks show weaker crews demands in august and lower prices. We saw a lot of this from norwegian and royal caribbean, warning of weaker sales. ,oday, front and center, jobs look at dollars, look at rates. Joe i wanted to show a chart that bloomberg swept up in the wake of that report. Hoursws aggregate weekly for all employees and production nonsupervisory workers and you can see it roll over, it is a noisy series just like anything. Concerned, to be here is one indicator that may be a sign that job creation is slowing down. Others saying we are at a higher plateau and we cannot keep growing this fast because we are exhausting the unavailable workers and maybe we are at full employment. An aggregate indicator you may want to watch. Alix was that you do weaker demand or did more go on vacation in august. Something to watch Going Forward. For more, david wu, head of global rates, great to see you. Joe what is your take away from the report and some of the Market Action we have seen . David we cannot look at this number in isolation, it was fairly disappointed, manufacturing was disappointed, auto sales disappointing, the three key pieces of numbers for august were all relatively on the weak side. If you are the fed looking for an excuse not to hike in september, you have it. It tells me that the u. S. Data june and july probably was i am not saying the economy is slowing dramatically but certainly it is unlikely to be sustained at the rate we saw in june and july. Alix why the market reaction, why a rally and then i will sell instead, how do you explain that . David we have to be realistic. Talking about the friday before labor day weekend, a year that has been really very difficult for most macro investors. The efficiency of the market on a day like today. Yes, the Marketing Market pricing an 18 chance of a hike in september, i would bet against that. Brief drop into year yields, jump back out but it is the last friday of the summer so who knows. What about medium to longterm picture for investors, does this change the picture . David if they will not hike in september, no chance they will hike until december. By then we will have a new president and know something about the outlook for u. S. Fiscal policy in 2017, far more important. Now that the jobs numbers are there, come next week people will think that the fed will not be an issue for the market. The real attention will be the u. S. President ial election which i think is the biggest elephant in the room. Alix the flipside, do it now, only three weeks of uncertainty, if you wait until december you have u. S. Election risk, european risk, brexit risk, do it while you know what the risk is. David by december they will know a lot more. We are talking about a clean sweep, by either party which would suggest which market, the transition of fiscal policy gives the fed a lot more confidence. If you get more gridlock, the fiscal policy will remain in hibernation and the burden will continue to fall on the fed to support the economy. The fed may not answer the hike in december. Alix always outspoken, i love it, you are speaking with us, for more on the jobs numbers, jason furman, joins us from the white house. Good to see you. The highlight, wages, up just 2. 4 , what happened with wages in august . They were up a bunch this rising at a 2. 8 annual rate. That is faster than the pace of inflation. We would like to see more nominal wage growth but we are seeing real ways gains for american workers. For economiccil advisers did a report on the decline in prime male age labor force participation, this secular story that you have been doing a lot of research on and people have been thinking on. When you look at the numbers today, what does that tell you about this ongoing story of people who theoretically should be in the workforce but are continuing to drop out . The labor force Participation Rate has been good news for the economy in the last couple of years. It has been flat since the end of 2013. The thing to understand is democracy, the aging of the population should be lowering our Participation Rate by about a quarter of a point per year, some of the underlying trends that have been going on for decades should be lowering it even more, the fact is a Strong Economy is bringing workers back into the economy. Fighting the underlying demographic trends. And leaving it as a draw overall. Joe do these trends in labor force Participation Rates have an effect on average Hourly Earnings or wage growth . Men forasing number of secular workers in general dropping out of the workforce, does that exacerbate a potential labor shorter the shortage or the impact of what full employment can do to wages . If you think men are giving up working, that should drive up wages for the other men that stay in the workforce. If you think the demand for those workers has gone down, then you see less employment and lower wages. Over the last many decades, the second story, that reduction in demand has resulted in lower employment and lower wages is what we have seen. Alix there has been criticism that the growth in wages have been a lowpaying sector like retail, 20 versus the other 80 of higher wages, we have not seen the growth. How will we see that shift or can it . You see wage gains across the jobs sector, that is what you want to see, we have a lot of different workers in our economy. The best way to judge the quality of the job is to look at the way to number. Has beento number consistently wage number has been consistently rising faster than the rate of inflation. That means jobs are getting better, they are paying better. We would like to see more of them. Alix thank you for joining us. Coming up, the currency winners and losers in all big now makes, we will ask david wu about his favorite trade and. Alix this is bloomberg go. I am alix steel. More exclusive interview with Vladimir Putin. Wu talkingith david about markets, the jobs report come everything going on. I want to get a check on the markets with Abigail Doolittle. Happy friday. ,he nasdaq mover lululemon shares plunging, the worst day since december 9 of last year after the athletic wear maker missed Second Quarter cop, up 5 , estimates calling for up 5. 9 . Says sherg analyst expects this continue into the Third Quarter. Someone from wells fargo said they gave the bears everything they were looking for, they recommend buying the shares of lululemon, he says the stock have may have gone too far and too fast. He thinks there is good value. The longterm story is intact. Trading lower today is smith wesson, down sharply after the company put up a beat and raise quarter, arong downgrade from to hold, an analyst is saying the current environment is about as good as it gets and that the cycle is digging into the november elections, so he is recommending moving to the sidelines. Alix thank you. Us, david wu from bank of America Merrill lynch, head of global rates strategy, the other chart of the day, what happened to the 30 year yield in japan, adding 6. 5 aces points today, five basis points, you saw the they werehigher, buying majorities and that raised questions of how the boj is joe you have been warning about what could happen to market post election, particularly if we get a president with a fiscal stimulus mandate, it seems to me this rise we have seen in japanese yields happen right after the upper house election hand wasabes strengthened during him more of a mandate, it was that a canary in the coal mine for u. S. Investors of how politicians can shift things . David when we talk about helicopter money, what is it, the only one country in the world where there is no problem with inflation is venezuela, they have it for 50 , the got there 450 , they printed inflation,ou want to need big fiscal deficits, me, helicopter money is no more than physical that monetary expansion. Japan needs to send a check to everybody in japan and send it every single month meaning they have to be prepared to run a much bigger budget deficit for a sustained time for it to work. Market isat the thinking about, especially given a Monetary Policy is at its limit. The question is september, i think it is early, a slippery slope. Growing more skeptical about the effectiveness of more monetary easing. I do not understand why the markets are looking for helicopter money, they said they are not doing it. I do not understand what the market is looking at. David i agree, were talking about fiscal policy, this will come down to abes government. If they start to run eight much bigger budget deficit for the next 10 years, then the boj will not have a choice but to fund it. Does the government, are they so desperate at this moment to say, this is it, we will go down this path. Is such a big decision, i have to believe they want to see pope will happen with the fed later this year and the u. S. Elections, theyre hoping that the environment will build bail them out. , an immediate drop after the number but it has been a race, above 103. 61 now on dollaryen, how does the u. S. Data and the impact on dollaryen affect what the boj does next . David of all the people in the world, the ones that have the most investment in payroll numbers would have been the boj, had we got a strong number, if the fed would hike in september, you could make the case it could take the boj off the hook in september because, the dollaryen higher, now you get basically a relatively weak number, the fed will not hike in september which means the boj may have to do more in september. From that point of view, i do not think there is much they can do. I think at this point, the market behavior, it is an inefficient market, next week the dollaryen will be lower. Alix you said not much more the boj can do, reviewed they are undergoing, a nonevent . David a huge event if they come away with nothing because the market will all of a sudden wake up to the realization that everything they have been doing to now looking back to the last three years, if we were to measure the yen weakness of the reflection of their success, 2013, dollaryen went up because of taper tantrum which made treasuries much more attractive. 2014 come a massive dollar rally around the world, the dollaryen when higher. They have been lucky with abenomics, and unless the environment is supportive, which the data suggest is not going to be the case for the time being, japan will face some tough crisis. Alix a pleasure to have you. Always feisty on a friday morning. Coming up, bloomberg markets, mark barton and vonnie quinn, digging into the job numbers and the goldilocks market reaction. And digging into the jobs Vladimir Putin exclusive on bloomberg markets, we are going for the forum, a couple of big interviews, the polish finance minister, cannot wait to ask him about how brexit is affecting his economy. That is in over one hour. And the former italian prime ister also joins us from we have had some optimistic signs from the italian Prime Minister, the italian finance minister for the outlook on i tell you in banks, does he share that view and the aflcio chief economist will join us to talk about the jobs report and what it means for wages and the fed. Bloomberg markets in 11 minutes. Alix looking forward to it. Coming up, more with Vladimir Putin, he spoke with john Michael Slager about dnc hacking allegations here this is bloomberg. Alix listen president Vladimir Putin that russian president Vladimir Putin sitting down with bloomberg. We asked him about the dnc packing scandal, he denied allegations of meddling in the race and says the kremlin is ready to work with any administration that is willing. Pres. Putin i do not know anything about that. You know how many hackers there are today. Act so precisely that they can leave their mark in the necessary time and place. It is a difficult thing to check. We do not do this at a state level. Isnt it time pres. Putin is that really important . The important thing is the content given to the public. No need to distract the publics attention with the search for who did it. I want to tell you that i do not know anything about it, on a state level, we have not done this. , i cannotst understand how this information is interesting to the american society. Even from this point of view, we could not have penetrated it. To do that, you need to have a thing or on the balls. Finger on the pulse. Do you not think there is a time when everyone should come this, america tries to hack russia, russia tries to wreck america, china and everyone trying to hack each other, one of the purposes is the of the g20 is to come up with a new set of roles to be a more ordered version of Foreign Policy when everybody is doing it, allegedly . Pres. Putin it would be better not to get involved. G20 was formed as a platform to discuss issues can about the global economy. If we had squabbles, serious instead of working on issues of finance, structural changes to the economy, taxation, in place of that, we would argue about Serious Problems for other wont problems and talk about the middle east, better at other venues. The Un Security Council for example. Alix that was Vladimir Putin with a bloomberg editor and chief, tuna and all day to watch the exclusive interview and do not miss our special report on monday appeared 25 minutes into the session, 1. 5 hours from the jobs number, equities, as in securities out with a note saying this is a sweet spot for risk. Joe that is the theme, goldilocks, equities rallying across the board, interesting things on the treasury front, after the report, the immediate dropdown yield. Jumping right back it is the virtually the same shape on the 10 year, higher than premarket at the long end of the curve, roughly flat yields but equities off to the races. Alix back to 30 of a probability of a rate hike in september. Such a pleasure. That wraps it up for bloomberg go, have a wonderful weekend. It is to 00 in new york. 10 00 in new york. Mark this is bloomberg markets. Vonnie from washington to tokyo. Out of the u. K. And italy in the next hour. The u. S. Added 151,000 jobs in august, less than the forecast but still hiring is it enough mark in a wideranging and exclusive interview, bloomberg sits down with russian president Vladimir Putin. We will hear from him on whether he thinks the euro cant survive in the wake of the brexit vote. How government officials efforts to overhaul the countrys banks will be successful