Transcripts For CNBC Squawk On The Street 20160603

Of average. Take a look at what this is doing to the markets at this point. Well, you know, weve we came back yesterday. You can see we are looking for a slightly lower open as of now. European markets already in session. And on the closing end of their day you can see kind of a mixed session over there. This is where we may see the most move is in the tenyear note yield. You might expect of course the expectation the feds going to move now in june has fallen dramatically. Will it even be july. There it is, the yield now 1. 72 . Weve been sitting of course a good 10plus basis points higher than that until this number came out. Weighing on the may payrolls of course were job losses in construction, mining and manufacturing. Even without that verizon strike, payrolls would have only increased by 72,000. You may recall verizon had 34,000 employees on strike. The Unemployment Rate though fell to 4. 7 . Now, that is due in part to people dropping out of the labor force. Average Hourly Earnings rose 0. 2 . Were talking, jim, about 458,000 people leaving the work force. Yeah. So you get this incredibly low Unemployment Rate which then starts to make you wonder about labor shortages in a sense and whether well see wages go up, but so many different questions here. Other than the fiat by minimum wage only sorry to read like this, also referred to as involuntary part time workers increased by 468,000 after showing Little Movement since november. People, you know, you dont want to pay them full time, you have to give them minimum wage so you cut back shifts. Yep. Put this in perspective, we have a threemonth average now 116,000 jobs a month well below the sixmonth average of 170,000 and 12month average of 200,000 a month. Job growth clearly slowing over the last three months. Easy enough to say that. The question is what are the reasons. You heard austin offer up the idea that perhaps productivity suddenly surging again after a lull that has lasted quite some time. Yes. Perhaps thats one reason. You mentioned the minimum wage going up in many different areas. Its not political. No. In many states. Ive listened to Allen Krueger talk about that. Theres a point at which its not clear maybe 12, maybe 13 where it starts to really be a problem in terms of job growth. But we dont know the answer. No. One thing we can of course opine on is what the fed will do with all of this. Sometimes ive been wondering where are all those job losses that come from oil and gas. When you see revisions down month after month, you realize maybe they were slow to register those. But when you have schlumberger lay off tens of thousands, halliburton lay off tens of thousands and never see it in the numbers, now you see them in all sorts of manufacturing. You want to know is it digitization. Did it all come home to roost in a fourmonth period . I mean, thats hard to believe. Hard to believe, but i think your point on oil and gas is an interesting one because we have sat here and weve been dealing with this low oil price now for well over a year. And the con come by nant decrease in production and yet wondering when those numbers given how much of a positive it was for employment over the last lets call it seven years. And this is what youre seeing. I think a lot of these categories that they use dont really jibe with oil and gas. Its like where are the oil gas, are they in mining, whatever, but the pipeline business has fallen apart. Dozens of pipelines were supposed to be built and you hired those workers and theyre gone. Crude by rail, thats an industry thats dying. Interesting rail note today that is a little too bullish for me. You had retail, david, that really was quite weak. I mean, that was you know, this was the macys, kohls number. Right. You had a home depot number that wasnt as strong as we would have liked. I still think that one can come back. I wonder about all the things we heard from jeff bezos whether it be drones moving things into walmart warehouses, whether it be Assembly Line jobs these are trends that take place over a period of time. They dont necessarily hit in a very short amount i totally agree theyre not supposed to, but it does feel like a salesforce. Com economy. Which is that salesforce is whats the point of salesforce in all the contracts . Its to make it so theres no one between you and the customers. Like secretaries. Right. Frictionless. And when you see the contracts that they get, im not saying that marc benioff is antiemployment, just being im trying to be as apolitical as possible, but it does seem to be a lot of things came home to roost at the same time were finally seeing oil and Gas Companies belly up. David 50 a barrel, 49 a barrel, everybody held on as long as they could. There are 20 counties in this country that can make money. A lot of these guys come on and theyre speaking bank of america clients. Understood. They either get the futures to get oil to above 50 so they can sell crude in an efficient market or they basically are stuck. Not sure what to make of the 458,000 people who left the workforce. That takes the Participation Rate down to 62. 6 . Thats just off kind of its lowest level weve ever seen since we started to keep track of it. Look, i mean, obviously with the kind of precision we had a lot of people retiring. Do we have a lot of people sort of heading off into retirement suddenly . The next president or this baby boomers have this done where you have revisions that are radically i mean, this is like a real economy. We have data that can track the pair of shoes i bought and where they are yesterday. But they cant can we put amazon in charge of this . Once we have chips and everything. Artificial intelligence predicting what im thinking and we cant talk about what happened in april . Maybe the Labor Department should use watson to tell us what thats not such a bad idea, believe me. But this is embarrassing. Again, could we be this wrong . We track everything in this country. It is a survey. But we cant track jobs. Anyway, i dont want to lose sight of the minimum wage. I know that is not what, you know, that is a highly charged political issue. When i have all the ceos on from restaurants, they dont want to hire on the coast. It costs too much money. Are they political people . No, trying to make the quarter. Just trying to make a buck. Speaking of making a buck, lets talk about the banks here. They had been fairly decent performer recently on the idea that rates would move up and their Net Interest Margin would therefore benefit. This is going to hurt, one would think, given its going to take down the possibility of a fed hike any time soon. Yeah. Im sure were going to have plenty people come on and tell us, give us their take but that coupled with comments from fed governors talk about potentially capital moving up in terms of Equity Capital by 2018 also going to take a bit of a hit on the banks. The big banks. When you look at the rates today and how dramatically theyve gone down, its not going to cause a new rush in mortgages. Theres not a lot of houses for sale. Remember, were down to four months of houses. Its not going to reignite. But what worries me is that capital, the idea they need to raise more capital is not that was in their budget. They are very much capitalized. We talk about potential utilities, return on equity the idea youll see regularly going above double digits now becomes even more difficult to imagine. And i wonder, you know, jamie diamond quoted saying about breaking up saying of course not, it makes no sense. But i wonder if theres going to be longterm frustration on the part of stockholders with these extraordina extraordinary anemic r. O. E. S. In the 80s and 90s we owned these stocks for their yield. I remember when security pacific gave you like a 7 yield and then gave you nothing. Bank of boston, nothing, because obviously those yields were too high. But then there was a consistent 4 to 5 we get from the nations bank. These are all subsumed by obviously every other bank. You run into why you want to own these. And you can cut numbers across the board this morning. You have to cut numbers. You do. Really. You have to. You have to because the models indicate you know, the models were about a couple hikes. And now if you get a couple hikes, the economy will be so knocked off kilter given what we just saw that you cut numbers. We were doing 200, 250 a month. Why werent they raising then . I dont know. I mean, i think they were caught up with china in the last year. And, you know, we laugh but most of the people i deal with hedge funds think chinas a house of cards. I dont think chinas a house of cards. I know you dont. I believe there are many Different Reasons why we didnt and they werent wrong. But i think a lot of what happened is, you know, overseas. I mean, we are the most expen expensive place to borrow money other than countries where the current currencys well you have over 10 trillion in negative rates. Try getting those rates. Let me tell you. Ill try. Ive been trying. Have you . Cant get them. Can you get a negative mortgage . You cant get jack. You cant get a mortgage in the whole country of italy. Trust me. Got to pay cash. You cant get a mortgage. Speaking of europe and jamie dimon, j. P. Morgan chase ceo says a brexit would be terrible for the uk economy. And he delivered to employees in appearance with uk finance minister george os bourn saying if britain votes on june 23rd to leave the eu, it would mean fewer jobs. So if for today we can service eu companies here freely with systems, technology, research, investment banking, sales and trading. We can do it here. After a brexit, we cannot do it all here. And we will have to start planning for that. I dont know if it means 1,000 jobs, 2,000 jobs, it could be as many as 4,000. And they would be jobs both all around the uk. And as you know the most important for me is were going to take care of our people. Were going to take care of our people and take care of our clients. I dont want you to worry about it, but when you vote you should be thinking about Something Like that. Its an interesting message mr. Dimon was delivering. I mean, the chances people put i think brexit at this point are obviously lower than 50 . But i dont want to weigh in on exactly what they are. No, we know that issue involving try not to be part of a continent that is right. Has to do with borders. Yes. Borders. Go back to the brexit the uncertainty, the uncertainty of the political environment, obviously most of the ceos i talk to offline no one wants to be nailed as a democrat or republic republican, just business people. I got to go back, you go over the making of lets bring it down just to really where it should be. The making of a hamburger. Okay. At any of these fast food places. Okay. Three people has to go to two people. You take away the person who puts the roll on top of it. This is true. Youve got to get rid of that person. You need robots. This is whats happening. And it is happening that fast. It is happening. Four restaurant chains on in the last month. You know what theyre talking about . Theyre talking about we cant you know, we cant find people or we dont want to pay for them. But those are two different in a sense the world youre describing is one the Unemployment Rate skyrockets, were at 4. 7 . Now, the Participation Rate is more or less an alltime low. You replace people with robots. Look at these drone stores. Do you think these stories are about how fast they can do things . Its all coming. We talk about it every morning here when we get outside of our sort of daily rundown and we talk about the big issues, we do talk about this automation, robotics, a. I. And all the different ways humans are going to be replaced. Not to mention autonomous driving chrks to me is the biggest threat to employment. I think its the nurnl one profession of men in this country is driving something. Well, i come back having been to almost every single oil patch. When youre at these oil patches, i mean, they were just beehives. People, unskilled workers making really good dollars. And where are they . You know, pipelines in this country in the 1930s principle source of employment. They were a principle source of employment in this country until they stopped. Which is a problem. Particularly why in the northeast were paying a lot more for natural gas. The williams deal. Yeah. Speaking of employment the largest employer in this country, private i think its still walmart, that companys having its Shareholder Meeting today. Well check in as that gets underway. Also ahead Goldman Sachs chief economist jan hatzius on todays jobs report and the impact it could have on the fed. Lets look at futures as the market tries to understand whats behind this number. More squawk on the street coming right at you after this. T of the north face, we are working on the prototype to match customers to gear. Watson, lets give it a try. Say its midjune and im backpacking in yosemite. Of our 353 jackets, i can recommend nine. Watson, what if it rains . There is just a 3 chance of rain, so i recommend the breathable stretch fleece fuse form dolomiti jacket. A Perfect Choice watson. No wonder our Customer Loyalty numbers keep climbing. I believe we can do even better. I like the way you think. Walmarts annual Shareholder Meeting getting underway right now in fayetteville, arkansas. Retail giant already making news this morning announcing it will partner with uber and lyft to test grocery delivery. That is set to begin later this month in denver and phoenix. I have been to that meeting. It is a raucous affair held in a large arena with celebrities coming out, a lot of employees and many shareholders, but its not your typical annual meeting by any means. So who does the lyft, uber, who does that replace . What does that do . Thinking again of this theme of employment. Is this displacement or does this help . Potentially create. I was thinking create. But does it create . When you look at that number go back over the number i read about the involuntary, those are people who are shifts. These are people employed for parttime economic reasons. I hate to be too an ek doal about it, but i own a bar, david, i can stamp that ten times over, people want a shift. New york is different its a very expensive place. We have also seen the Washington Post series about how the jobs are not being created in smaller towns anymore. Theres just a lot of things going on very fast. And when i deal with the Technology Companies and all the chips that are amberella about bring in that layoff people. Broadcom though, which is actually going to be very, very big, qualcomm is part of an economy that is growing. By the way, i know people do get concerned about apple, theres very positive commentary about apple in the broadcom Conference Call about how theyre gearing up just to quote great executive, expect a very different picture for our wireless segment. Strong sequential growth mid 20 range start of a ramp from a large north american smartphone customer as they transfer to their next gen little positive. Foot race against amazon when i think of walmart, but destroy the competition too. Dollar stores are all over these areas too. Again, its about people not making enough money. You saw employment, people arent making more money. No, back to walmart for a second as the annual meeting begins. Youve become fairly positive. I have to be. As they try to fight off amazon or fight off, trying to claw back potential share from amazon. Scale. And the grocery business is one key part to that. Theyre playing to scale, a game they can win, by you texting you want certain groceries, they bring it to you. They can win by having managers have less turnover. Remember secret of costco has been far less turnover because they pay people better. This is like the henry ford 5 day, but recognize losing good people to other places so pay more. Hes making a lot of smart longer term moves that are paying off short term. There you can see the comparison between walmart and amazon. That sort of puts it thats just over a year. In fairness walmart, remember, he lowered the boom and the stock is now back to where it was and then some. No, it is. Hes quite an impressive figure. I know hes not a promotional figure and i know he really did feel many ways that, you know, he didnt drop the ball or drop a bomb. Remember he came on our network twice. He did. Came on mad money to explain things. Can we talk about stock market for a second, marge undergoing major shift last few days. Consumer package goods, if you yield 3 , david, stock is going up today because rates are down huge. Obviously when you look at the dollar, well the dollar is coming down. Of course with the prospect of a fed rate hike. Thats fabulous for international companies. What im saying is odd as it is setup is not bad. Except for banks. 83 of companies actually winners in this scenario. We cant lose sight of that. I know. Well never get off zerp, ever. I am so reluctant to be political because it doesnt make you any money. If oil were to turn here, wed have like a bang up day. Well, we may. We saw a big turn yesterday. We got a lot more coming up here though of course including cramers mad dash as we count down to the opening bell. Speaking of that market, take a look at futures. You can see that we are still looking for a down open right now but it doesnt necessarily mean were going to have a down day. More squawk on the street straight ahead. All right. Race quickly to a friday of course on a short week with the unemployment number today impacting trading, jim. We got a mad dash. I want to stick with the theme and just be able to shoe horn stocks. Union pacific upgraded today by Morgan Stanley as a hedge to the eastern rails. Norfolk southern started with a sell. We know very well company but people feel its not well run enough. I say its the top line problem. Its coal. When you look at these employment coal is going away at a speed we never thought could happen in this country. Its going away. Jobs are just going away, and coal towns the jobs are going away with it. Lets not forget we have a major industry that impacts a lot of states thats disappearing because natural gas. Right. Not global warming, natural gas. So Union Pacific, by the way, if you go to mexico, david, i got a place in mexico, theres a Union Pacific train that goes by three times a day taking cars, nafta cars. From mexico here to the United States. This is a great play on mexico and the strength of mexico. What was the news on it today . Morgan stanley says they like it. They say it does have its very well run company. And ive had them on a number of times. This is a good hedge. But its coal that is such a factor in layoffs. The railroads, when you look at the number of people they employ, Norfolk Southern in fairness they had such a decline they actually did well, but Norfolk Southern is about laying off people in order to be able to deal with the decline in coal. Decline in coal. You cant move coal by anything other than rail. All right, were going to be talking a lot more about jobs of course given that is one of the key stories of the morning. A lot of other stocks to keep an eye on as well, in fact, softbank selling even more alibaba than it originally did. Well bring you uptodate on that. Weve got the opening bell about four minutes away. The call just came in. Shes about to arrive. And with her, a flood of potential patients. A deluge of digital records. Xrays, mris. All on account. Of penelope. But with the help of at t, and a network that scales up and down ondemand, this hospital can be ready. Giving them the agility to be flexible reliable. Because no one knows like at t. Youre watching cnbc squawk on the street. Were live from the Financial Capital of the world. The opening bell is going to be ringing in about 40 seconds or so. I know what the key to this market is today. Jim, i dont really think i need to ask you, its questions about unemployment, its what the fed is going to do. I would argue. And ive got to tell you, remember, anything that yields 3 , david, that is this is whats going to happen again. Youre seeing cocacola. Okay. Cocacola is what people will reach for. They will reach for jnj. And they started yesterday. And there it is. The opening bell for this friday over at the headquarters of cnbc. You can see our realtime exchange as it starts to get itself together here at the big board jim mentioned Cocacola European Partners celebrating the merger of two international cocacola bottlers. Very enthusiastic crowd of cocacola employees. At the nasdaq state street Global Advisors and fixed income allocation spirited. Spirited cocacola crowd. Talking about burger wars, forget that. Weak dollar play. Its a watch mcdonalds, watch jnj. Okay. These are the stocks, remember, Money Managers dont say, ah, they say, okay, bonds are not going to give me that so i got to go into this class of stocks. Consumer packaged goods. Now, they will flee the financials, but remember its only a handful of financials that you really that dominate that business. Thats true. I spent a lot of time bank of america. Theyve got an unbelievable app. Unbelievable, but thats about being able to be have frictionless, again, no branches. These are the type of things im saying the adoption. If you talk adoption is so rapid that it will impact your employment numbers. It may, although its not as though these big banks are throwing opening branches all over the place. Thats the question we always have. Why so many branches. We have to watch the semiconductors because the semiconductors do take their lead from broadcom. Lets talk a little about that. Symbol avgo. A brilliant acquisition. Up this morning after earnings. This is about both old and new combined the companies, this company was just an apple play. Broadcom is not. Broadcom is big switching communications play. David, all these buildouts we talk about for telcos, you need broadcom. You do. I was shocked you need 5g, i was shocked they got broadcom so cheaply because mcgregor is doing such a great job. They recognized there was a moment in time being caused by worries about china. They went in and bought it. By the way, same thing with nxpi, went in and bought free scale. Number four auto semi, number five auto semi, put them together, number one auto semi. Do you know how many chips are going to be in a car endless. I wish those chips were made in america. But some are. Its not the way it works. Like i said, youre not going to see the market crater if you had Consumer Products 3 yield bid, but you need to see tech take its cue from broadcom. Right. As we had anticipated of course the financials are weak as we noted. Jpm, bank of america, citi, goldman all down somewhere between 2. 5 and 3. 5 this morning on the big banks. Maybe not just because the likelihood of a fed tightening is a bit off but also this idea 2018 even more is going to be required in terms of capital, Equity Capital at some of the banks. J. P. Morgan killing. Just read top of the wall street journal today if you dont know what im talking about, the fed talking about that or at least that possibility in 18. And it is a long day. Lets not forget because the banks can cast a pall on anything. Weak dollar, favor international. Watch that cocacola. That will be your tell. That will be your tell. Because that yield is good. I just like it because its right in front of us. But muthar is giving you a great deal. I want to talk about softbank and alibaba. That was an enormous transaction. Softbank has sold what amounts to 10 billion worth of alibaba stock just in this week a variety of ways. The key one being 6. 6 billion raised through the issuance of this equity linked convertible. The convert is linked to its alibaba shares. In three years time when you buy this convert it converts to those alibaba shares. They exercise the green shoe went up another 1. 1 billion. That makes it the largest equity markets transaction globally this year. Its the equivalent all the total equity linked issuance in the u. S. And its also largest ever mandatory exchangeable globally and the largest ever equity linked transaction in asia. So you get the spurltives, it wasnt just 6. 6 billion through the convertible, it was also of course 2 billion right back to alibaba. Another 400 million to the alibaba partnership. And 500 million to the Sovereign Fund gic and then 500 million to 10 billion dollars. Going to turn out they were too concerned about the tax man . I dont understand the question. Well, yahoo should be selling. Oh, well, no, yahoo is not selling its alibaba stock. No, but let me back up. The alibaba financials, the whole notion of the disclosure. Well, last week we got this notice of at least the s. E. C. Taking a look. You do wonder a bit about timing, although frankly this softbank deal theyve been working on this for months. Right. I worry accounting irregulari irregularities because they have never produced an upside for me. This is a bit of a motivated sell. It is. Theres a lot more behind it. They got a sixmonth lockup at softbank and does change the approach and seams of the company to a certain extent, but theyre still an enormous holder of alibaba, Something Like 27 or 28 . Your point on yahoo so much we focus on sell of the core business of yahoo, really what people should be focusing on is what is going to be left, which is the alibaba stake. How is that going to trade . What will be the discount of that company and its holding being alibaba to the value of alibaba in the marketplace . Thats all you need to know really. If its 85 of the value instead of 80 , thats more of a delta than whether they get 4 billion or 5 billion or more than that for the core business. So many people focused on that core business when really the key is whats going to be left behind. Thats because the variant. We have the 2 billion to 8 billion range people talk about. Its interesting because the journal is regard as 2 billion range, the 8 billion is bob peck so to speak, i dont want to pin down bob because obviously fluid situation. But its verizon. Verizon, david, this is the kind of stock att is up nicely today. Verizon is down 11 cents. Verizon will be up because verizons a bond and people are going to have to get income somehow or other. The savers dont get, no, savers have to take a little more risk. They go to verizon versus 30year. I know. And theres a dividend yield on verizon of 4. 45 right now. All right. Let talk a bit more about the employment number we got at 8 30 this morning. The Labor Department reporting again that just 38,000 jobs were added in may. The Unemployment Rate went down to 4. 7 . Joining us for the first reaction from the Obama Administration is White House Press secretary josh earnest. Mr. Earnest, nice to have you. This 38,000 number has got some people concerned. Its also 116,000 average over the three months last three months clearly lower than what weve seen over six months or a year. Is job growth slowing down in this country . And if so, why . Well, listen, david, ive been reacting to jobs numbers at the white house here for more than seven years. And whats true today has been true in the past, which is we dont get too excited when the jobs numbers are better than expected. And we dont get too disappointed when the onemonth jobs numbers are lower than expected. What were taking a look at are the longer term trends. Over the last six months we have seen wage growth above 3 , thats a positive sign. Job growth has been over 150,000 jobs over the last six months or so, that is a positive trend. The reports of people who are seeking jobless claims have been below 300,000 for more than a year now the fourweek moving average. The longer term trends continue to indicate that our economy is resilient and continues to be making a strong recovery from the worst economic downturn since the great depression. The president has some ideas about what we can do to strengthen our economy. Yeah, of course. Another longterm trend has been the departure of people from the workforce. We had 458,000 people leave the workforce, which is the reason why the Participation Rate went down and hence the Unemployment Rate actually went down. I mean, were at 4. 7 . Is that a concern to you though how many people seem to be leaving the labor force . Again, this is a number we monitor here. And the longer term trend been has actually been positive. We actually put about a percentage point on the Participation Rate over the last six or nine months. Were giving a little of that back in this one months jobs report. But what were looking at are longer term trends and they continue to indicate that the United States economy is the strongest most durable advanced economy in the world. And the question i think for that americans are going to have to be asking themselves at the end of this year is are we going to build on the progress we have now, are we going to build on the momentum or tear it down . And there will be a pretty robust debate not just here in washington but all across the country about how to move our economy forward. Hey, josh, jim cramer here. Weve got some interesting revisions down. I just want to talk about the methodology for a second. Labor department, terrific, off and on tv, but when you see these numbers and theyre so off, do you ever think, you know, maybe we should switch this over to the Federal Reserve for instance has a great group of statisticians . Or do you bring in some of the people who an oracle, a salesforce that really know how to keep data minute to minute . Because i think the numbers themselves are a bit embarrassing that they could be so off. You guys are perfectionists, were all perfectionists, in a new age this doesnt seem to make sense to me. Jim, what i think is true is theres extraordinarily volatility even in these monthly numbers. We went through a phase early in the presidency where it seemed like every month the revisions to the previous months reports would be upward, but yet what the media understandably is looking at is most recent data. So there is sort of this regular pattern of underestimating job growth. And that was a source of some frustration among people who work in the building behind me. But look, i think there obviously is other data out there thats relevant to assessing the condition of the economy now and the trajectory of where its headed. And i think thats precisely why we need to look at more than just one metric and more than just one months numbers. We need to be looking at longer term trends. So certainly this months jobs numbers is instructive, but it cant let us be determinative in terms of drawing our assessment on the economy. We need to look at the longer term trends as it relates to the job market but also the longer term trends when it comes to retail growth, the housing sector. There are other signs of strength in our economy and its important to factor those in to a broader assessment of where things stand right now. When we talk about longer term trends, mr. Earnest, we talk out years from now we talk about growth in robotics, growth in artificial intelligence, the growth in so many things that will no longer require humans to do them, i mean, that becomes a scary proposition when you talk about the broader job market in this country, doesnt it . Well, there is no denying that our society and our economy is changing and is being profoundly impacted by technology and by the fact that our economy is increasingly globalized. And thats why youve seen the president at the forefront of advocating for things like improved job training, Free Community college education, look, a generation ago getting a Good High School education and going into the factory in town was a great way to get a good middle class job, to raise your family, to save for retirement. But that option is not available to nearly as many people as it was before. So we need to be thinking creatively in the future about how to prepare our workforce for this Global Economy thats going to be influenced by technology also why the president s been a leading advocate of the transpacific partnership. If the u. S. Economy and u. S. Businesses and workers are going to be competing on the international in international markets, then we need to be looking for ways we can level the Playing Field for american businesses. So lets go out and cut deals with vietnam and other countries in Southeast Asia and put pressure on them to raise their environmental standards, raise their labor standards so we can start to level the Playing Field for american businesses and American Workers. Lets also make sure that american businesses and American Workers can get access to the vietnam economy in the same way vietnam businesses have access to the u. S. Economy. Thats a winwin for the u. S. Economy. Its a winwin for u. S. Workers. It also is a way for us to cut taxes, 18,000 taxes that other countries impose on u. S. Goods. Glad you got the vietnam in there of course given the trip earlier this week. Finally, the man whos a presumptive nominee for president for republican party, donald trump, of course who opposes tpp, just tweeted a few moments ago, as he tends to do, terrible jobs report just reported. Only 38,000 jobs added. Bombshell final question, get a response from you, mr. Earnest . Listen, its not uncommon for me to be asked about tweets from the Presumptive Republican nominee. Hes certainly entitled to avail himself of the First Amendment and share his views. I think what smart analysts of the economy are taking a look at right now are the longer term trends not just as it relates to the job market but also things like growth in retail sales, improvement in the housing sector, improvements in the Manufacturing Sector, and the question really is going to be for the next president , for the American People as they choose the next president is are we going to build on the momentum that our economy has built up, or are we going to tear it down . And i assure you that we look forward to having that debate over the course of this year. We appreciate your joining us, mr. Earnest, thank you. No problem, guys, thank you. All right. Josh earnest, press secretary for the white house. All right. Yeah . I dont know. Still going over the methodology. I cant believe that i can track a package that day every single second but i cant track jobs. Wasnt really asking about the volatility so much. The Labor Department you got to talk to. Its time. I mean, its time. You mentioned watson. Im saying theres a lot of Technology Companies that do Amazing Things and broader end of the government sounds like this is one they havent obviously really done a good job. Speaking of a guy who is on top of every single data point, bob pisani on the floor. More on whats moving this morning, bob. Good morning, david. You cant gill the lily, certainly big disappointment particularly revision but market response very modest. Take a look at the banks. Theres the big concern of course were down on the tenyear yields, but elsewhere look whats happened to commodities. Base metals like copper are up and the metal stocks are all up nicely today. So youve got moves up in Freeport Mcmoran doing well, commodity stocks all up about 2 . I think the important thing here is thats a big help in that sector here. Overall pattern fairly typical when you miss on a jobs report. Cyclicals, consumer discretionary, all on the weak side, defensive stocks doing better. This is what happened, we asked the 31 times since 2006 we had a big miss on the nonfarm report, this is exactly what happens. You can see exactly this. Consumer discretionary, industrials down, noticeably utilities flat. Meantime markets holding up very well. Look at the leadership, advanced decline line has been strong, the russell 2000 is at a sixmonth high, the nasdaq at a sixmonth high and the s p 500, 2 of an historic high. Thats been a source of a lot of angst with people that we cant get over the new high. But bear in mind this is fairly typical. I asked my fan runs the independent advisor for vanguard investors, one of the best investor newsletters out there, how often this happens, since 1957 the s p 500 has spent 37 of the time within 5 of a new high. Think about that. 37 of the time were in 5 of a new high. The important thing is thats normal. In other words all this hand wringing about 2 , why cant we get over it, this is normally where we are. Watch the close here, were flat for the week, believe it or not. We have moved higher in the last hour every single day this week. And, guys, this would be a very good test to see if that pattern will hold. David, back to you. Thank you very much, bob pisani. Well, the bond markets of course as you might expect quite busy this morning. Rick santelli at the cme group in chicago. Rick. So many huge moves going on, david. Of course the huge move today, the big drop in unemployment to 4. 7. Of course we refrain from bragging about that when you take the report in its entirety. And we look over the vast number of people that just arent part of the system of counting. And jim cramer and everybody else is right, there needs to be a better way. Tracking packages is a private sector issue. Tracking people is public sector. Draw your own conclusions. Look at intraday two, unbelievable. Now look at it from may 1st. Look at the same dynamic from tens. Look at it from may 1st. But heres really in my opinion the charts that you should pay the closest attention to. Look at intraday 10year bund. Notice the low yield intraday. Now, intraday is the roller coaster, where you get on and where you get off is what counts. We traded down to six basis points, seven and change is the historic alltime low as you see on this chart starting in april of 2015. But it isnt only the 10year bund that intraday was in record low territory, it was the 9year, 8year, 7year, 6year, 5year, okay. The more we see improvement in the lower Unemployment Rate, the more we create jobs that are questionable, the more the feds in play, the Central Banks are in play, the more negative everything gets. This is a cycle thats going to be hard to break. Foreign exchange, holy cow. Look at intraday of the dollar and intraday of the euro versus the dollar, 111 handle to 113 handle just like that. David, back to you. Thank you very much, Rick Santelli. Coming up, Goldman Sachs chief economist jan hatzius joins us on this mornings weaker than expected jobs report. Squawk on the street be right back. They may want the latest products and services, but they demand the best shopping experiences. Theyre your customers. And by blending physical with digital, cognizant is helping 8 of the 10 largest u. S. Retailers meet their demands with more responsive retail models. Ones that transcend channels and locations, anticipate expectations. Creating new ways to engage at every imaginable touchpoint. Its a new day in retail, and together, were building the store of the future. Digital works for retail. Lets talk about how digital works for your business. Theres a look at the dollar index. There you can see its down as rick was just talking about. Will we see a bid maybe of multinationals to a certain extent, unclear, although they have not been performing that badly. As you can see its kind of been stable. Yeah. Now its down. Year over year do final people stop talking about it. I know. We have stop trading with jim coming up. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 59. 95 a month. Comcast business. Built for business. What if 30,000 people download the new app . Were good. Okay. What if a Million People download the new app . Were good. Five million . Good. We scale on demand. Hybrid infrastructure, boom. Ok. What if 30 Million People download the app . Were not good. Were total heroes. Scale on demand with the Number One Company in cloud infrastructure. The light bulb, a bright idea if you use the right ones. Led bulbs use 85 less energy and last a long time, saving you up to 100 over their lifetime. Heres an idea replace yours today. [light instrumental music] replace yours today. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Lets get to it. Okay. Final stop trading for the week. Tried comeback from california and watch the super bowl, thought for sure there would be broadband, but it was gogo systems, cant accommodate netflix. They just cant. We were not able on that particular plane. Maybe gogo can do it somewhere else. Anyway, gogo lost some orders in new American Airlines batch of planes. When ive had them on many times you can get netflix, so this is about netflix, david. Right. Its about getting your broadband and being able to stream on your flight. Also insurrection by the way you are harboring a serious grudge about that super bowl. That i missed it . Yeah. You were. I said how could there be in this day and age i cant stream he said ill give you scores. Whos flying during the super bowl . Come on. It was the only time to see my daughter. Thats a good reason. Plus it wasnt like the eagles were in the super bowl. No plane for you if that ever happened, but i dont see that happening. Trainers said the other day giants won two super bowls since 2007, why do you tell me that . What about the phillies . Theyve stopped winning. So have the mets. The last of my revolution, im doing this revolution change of the guard retail i dont want to reveal who it is but its very exciting. Weve done a bunch of them. I know its been a truncated week, but its great. I apologize i dont have a great answer for the employment number. Im not sure anybody does. I dont want to pretend i do. Sometimes things are puzzling. Thats why i felt the methodology, i thought that the man from the white house might be as skunked about the methodology as i am. I dont think the press secretarys thinking about the methodology. No, i know. Hes going back to talking points on vietnam and trip and tpp. Hes not thinking about methodology. Defense to vietnam. The fall of saigon to defense orders. Old saigon 1975 have a great weekend. You too, man. Doing anything special . No, not a darn thing. Really . Yeah. Coming up though ill give you a call. Yeah, i will. Maybe hes got an answer, jan hatzius going to react to this mornings jobs report, Goldman Sachs chief economist and live report from walmart Shareholder Meeting in arkansas. Well be right back. Good morning and welcome back to squawk on the street. Im simon hobbs here with david faber and mike santoli. Carl and sarah are off today. Meanwhile, on the markets bitter disappointment this morning for many that the economy only generated one quarter of the jobs expected by the market in may, 38,000 nonfarm positions. Falls on the stock market cushioned by the expectation that the fed is now less likely to raise Interest Rates this summer. But bank stocks are taking that on the chin. On the Foreign Exchange market severe pressure on the u. S. Dollar, the euro, the uk pound and the japanese yen rocketing higher as the greenback takes a pummelling. We have breaking Economic Data. Ism nonmanufacturing for may and factory orders for april both are out. Lets get to Rick Santelli in chicago at the cme. Rick. Absolutely. Lets start with factory orders. For the month of april they were up exactly as expected up 1. 9. We did get a subtle positive revision to last month from 1. 1 to 1. 7. Now lets get into the more juicy data. April final read on durable goods 3. 4, whats fascinating here is a lot like michigan the preliminary read gets thrown out. What was that . 3. 4. So we ended up matching that. Okay. Lets get to may isms, shall we . The most recent spat of data, 52. 9. Now, 52. 9 is pretty notable. Ive been ciphering here. It looks to me like i have to go all the way back to february of 2014 to find a lower number at 52. 6. Thats quite a while. How far back do we have to go to get under 50 . All the way back to january 2010, in case you were wondering. Lets go through some quick internals, shall we . On the ism nonmanufacturing, thats the Service Sector number, the new orders moved from 59. 9 down to 54. 2. On the employment, which we just had today, this number nailed it, why . It was 53 it now stands under 50 at 49. 7. So my opinion the nonmanufacturing Service Sector biggest swat to the economy. That number is definitely weaker than expected. We are seeing yields come back off the low yields, but theres been sizable moves to the downside. But really you want to watch europe. They have negative rates all the way out. And if you look at the tenyear, bund, it is trading negative rates out to nineyear, its trading around 7, 8 basis points. Intraday it violated its alltime low yield as did most of the curve all the way back towards the fiveyear sector. And that is a tremendous force making our very low yields look a lot less low on a relative basis, hence the term the relative value trade. Simon hobbs, back to you. Thank you very much, Rick Santelli. The burning question of the morning of course how much of a game changer is todays employment report miss . Steve liesman has more at hq. Morning, steve. Simon, im hearing a lot of stuff here about this report, shocking, surprising are the numbers coming from wall street analysts as anxiety grows about growing economic weakness just beyond the jobs report. One thing it says to a lot of economists all agree on not june for the fed. Barclays writes even more. They go the may employment report also poses risk to our baseline outlook for a september rate hike and increases likelihood that any subsequent move by the fed to raise rates may not happen until december. So put it off a couple months according to barclays. Cnbc did a little calculation this morning, this is the eighth worst forecasting miss by the street since december 2003, 145 months, we went back as far as back as our data goes. A miss of this magnitude usually but not always comes with a bounceback the next month relative to the threemonth average. Not a lot to hang your hat on especially when you look at these numbers. Nonfarm payroll 38,000, threemonth average crashing to 116. Not too long ago it was up near 200,000. Unemployment rate falling but mostly because people left the workforce. Not a very good sign. Labor force participation ticking down to 62. 6. Average hourly wages not too bad at 0. 2 . Year over year theyre about 2. 5 . Heres where the jobs arent. Usually we do where the jobs are. This time its where the jobs arent. Information, thats your verizon strike. So you can probably add back 35,000, 40,000 to the number. Its still a weak number. Temp help can be a leading indicator of where the jobs market is going. That was negative. Construction inexplicably negative since weve had positive construction numbers from a lot of different sources. And manufacturing that has been weak. It continued to be weak. It was positive job growth in retail, professional Business Services as well as leisure and hospitality. Bmo Capital Markets says assuming employment rebounds in june and britain opts to stay in the eu, the fed is probably on track for a july move. The data has to be good if thats going to be true. And over at ubs they write a weak payroll report raises some questions but one report is unlikely to dissuade the fed from two hikes this year. This is a cautious fed thats shown it will side on standing pad or remaining low amid uncertainty in weakness the fed unlikely to hike amid a jobs report that raises substantial questions about the strength of the jobs market and the broader economy. At least the fed is going to seek clarification, as all investors will, that this report is maybe an anomaly relative to other Economic Data so far pointed to better growth, simon. You know, steve, you know as well as i do many people regard the employment report as in essence a random number generator, just sheer probability means sometimes its going to do strange things. If you were able to put it to one side and you focused on the Unemployment Rate falling to 4. 7 , which is a bigger fall than people expected, what does that tell you . You know, thats even more of a random number generator, simon. Okay. We had a sixmonth trend of people entering the workforce. This reversed it in a very strong way, half a Million People left the workforce. Weve been up 2 million year over year, you have to be very careful with these data, take a step back and average it over three months and the job market is okay. But clearly has down shifted. And what we have to figure out what that means for the broader economy. Okay. Thank you very much, steve. Its going to be a busy day all around, i think. Sure. Lets get more on whats going on founder and ceo of ds economics joins us live and david kelly chief groelobal strategist at j. P. Morgan funds. David, what is your reaction to this figure . Obviously these a weak numbers. I think one number doesnt make a trend. I think one number is enough to put the fed on hold here, but i would caution everybody that theres a lot of statistical noise here. For example, nonfarm payrolls not seasonally adjusted have gone up by 1. 7 million in the last two months. In other words, they normally jump a lot in april and may combined. They just didnt jump quite so much this spring. You know, is that a change in seasonal patterns not catching properly . I think so. The labor market is not that weak. Clearly the pace of payroll jobs had to slow down. We were adding 240,000 jobs from october to march, an economy barely growing over 1 . It had to slow down. I dont think in reality has slowed down quite dramatically as these numbers suggest. David, what is full employment . At what point do you say this is about as good as the economy can get on this sort of Monetary Policy . I mean oh, i think were pretty close to full employment. I think its hard to add good quality workers at this point. You know, the average Unemployment Rate for the last 50 years is 6. 2 . We are at 4. 7 . That is a low Unemployment Rate. Diane, what is your take . You know, on the Unemployment Rate i think it is important that theres a debate within the fed and what is full employment and this really challenges, although it is only one month and i agree with david that you have to take it into larger context, still a body blow for the data dependent fed because it says dont in june, obviously. I think a larger issue here is what is whos right at the fed . Is there slack out there, can we reengage these workers over the longer haul, or are we really sort of pushing on a string and seeing wages more fundamentally accelerate . Given we lost a lot of high wage jobs to the verizon strike this month and we were still able to maintain 2. 5 wage gains, nothing terrific, but maintain that pace of wage growth i think is very important underlying youre hearing a lot of ceos are accelerating. Let me pick up this point on the verizon workers that were on strike. Even in the bls, everyone in the news release that they come out with they talk about the 35,000 figure. This is not really 38,000 plus 35. The expectation was that it would be 200,000 give or take less those workers. In other words, the headline figure on expectations already factored in that wed have the deduction from the verizon strike, did it not . Actually, i had a much weaker number, so i wasnt expecting that. I was expecting closer to 130,000. Right. But even then were still off 100,000, so lets face it any way you cut it its bad data. I think one of the interesting things is theres two things going on, weve got the Manufacturing Sector continuing to contract. I agree construction will probably get that back, that looks a little bit of an anomaly and well get that back with those verizon workers. And remember the threshold for the fed unemployment gains for a rate hike is lower than that than sort of the market expects. Theyre comfortable with about 100,000 and 70,000 or so with the verizon strike, were not that far from it. So theres that difference between not only is where the momentum going . We are down shifting a bit. The fed expected that. The question is can we get to a level they feel like were regaining enough traction to raise rates. And i think thats important. The other issue is in retail hiring has slowed. And thats another place where it was a big job contributor in the first quarter. It has now slowed quite dramatically. And we know secularly we are moving away from bricks to clicks. Real estate doesnt mean what it once was in that sector. David, with all the caveats in mind about not overreacting to a single number, theres a buying panic in treasury bonds. We have the yield on the tenyear back down to 1. 7, all the yield related stocks are rally because of that which is perhaps why the market is not selling off more is this just a new world . In other words, can we see the yield complex remain in favor and people just buy these things up and assume much lower for much longer until further notice . I dont really think so. I mean, what im looking at right now is demand. Looks like Consumer Spending is going to grow about 3. 5 pace in the second quarter, better trading numbers and housing numbers, if we pick up in momentum, remember revision to all the gdp data in july. That could be substantial. So i think later on this year the economys going to look a bit stronger. And i think the fed is going to have to reengage in raising rates. And with long rates this low, i dont really think theyve got much further to go down. I think they have room to go up. David, if you were to look at whats happened recently and why the figures might do what they did, the elephant in the room is clearly the Election Campaign which has moved up a couple of gears. It clearly absorbs a lot of people with a very robust reaction from people. At what point will we be able to tell if the Election Campaign six months away from a decision is actually impacting these figures . How will we be able to get facts on that, do you think . Well, i think the way to look at it is for example on wages with a 4. 7 Unemployment Rate, id say this is a pretty tight labor market. But the rhetoric is there are millions of people unemployed in america and people cant find jobs. And if people believe that, then workers wont demand higher wages and employers wont grant higher wages. So i think the Election Campaign is actually diminishing Consumer Confidence and holding wage growth down. I disagree with that. I actually think what were seeing here is the secular shifts weve seen building over decades. If you look at where the Participation Rate just took another blow, where it had improved, gen x and younger baby boomers the people tend to be most angry right now, tends to be white men, we can look at the labor numbers on that category and you can see why they are so angry and disenfranchised. They are experiencing a different economy than what the overall aggregate figure suggests and thats why were seeing whats happening. So i think theres sort of the elephant in the room is the fact that the labor numbers, the employment numbers are still showing us that the economy is not all healed. In fact, we have a long way to go to regain anything weve lost. Its a big day and good to see you both. Thank you. Diane swank and david kelly. Coming u7 on the program, walmart kicking off annual shareholder making big announcements including new grocery delivery program. Well take you live to the big dance. Plus a deep dive, big miss on the job reports means now for the state of the economy and of course when the fed will actually raise Interest Rates. Goldman sachs chief economist jan hatzius will join us live on cnbc. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Man 1 man 2 i am. Woman exmilitary . Man 2 four tours. Woman you worked with computers . Man 2 thats classified, maam. Man 1 but youre job was Network Security . Man 2 thats classified, sir. Woman lets cut to the chase, here. Man 1 whats youre assessment of our security . Man 2 [ gasps ] porous. Woman porous . Man 2 the Old Solutions arent working. Man 2 the world has changed. Man 1 meaning . Man 2 its not just security. Its defense. Its not just security. Its defense. Bae systems. Walmart holding its annual pep rally otherwise known as its Shareholder Meeting. Executive shareholders and global employees gathering to vote on the proxy statement proposals and celebrate its accomplishments. Our very own Courtney Reagan is at the event at the bud walton arena in arkansas. Courtney, good morning. Reporter hi there, good morning to you, simon. So walmarts sprinkling in a little bit of business, but so far it has been quite a celebration in the arena behind me. There are 40,000 attendees at walmarts annual Shareholder Meeting. And james corden was the surprise celebrity emcee for the event. He came out and introduced Board Chairman with quite the zinger. Take a listen. The next man coming to the stage is married to rob waltons daughter. But thats not how he got his job. Its not. Stop it. It isnt. He got his job because he worked really, really hard. As you can imagine there was a lot of laughter for that one. Andy grammar was the first surprise musical guest and there are several more to go. All week walmart has been hosting both employees and media from around the world focusing largely on initiatives and multibillion dollar investments in its instore technology, ecommerce, employees and operational cost cuts all allowing to cut prices further so shoppers can keep getting the lowest possible prices in store and online. The goal of course is to help walmart grow share against competitors like amazon. But while walmarts u. S. Samestore sales have groan for seven straight quarters, its ecommerce Sales Growth Rate has decelerated seven of the last eight quarters and the ceo has said that growth is too slow. Today, walmart announced it will begin testing using uber, lyft for online delivery of groceries. Shop online and request the drivers deliver directly to the shopper. That standard fee online is 7 to 10 and that remains the same for consumers. They wont be paying any more for those uber, lyft drivers. The Walton Family does still hold 52 of the outstanding shares which means all of the 11 nonretiring Board Members will get reelected plus the addition of stewart walton, the newest member to join the board and none of those shareholder proposals are expected to pass. Simon and all yall back to you. What about the uber lyft delivery connection here. Is that transformative, do you think . Or just a small pilot study to show theyre on it . Reporter so in the beginning it is just a small pilot study, but four big retailers like walmart, that last Mile Delivery is really, really tough, particularly for grocery. Because obviously you have to think about things like refrigeration, delivering when the customer is going to be home. You have to trust somebody else to pick out those groceries. So the online ordering part is easy. Walmarts already been doing that with pickup locations. Theyre going to have 50 markets that offer that by the end of the month. They say its going really well, but actually delivering it is tougher. Its very hard to do in less dense populated areas, which is most of the areas walmart serves in the country. So its a pilot, but i think there could be some learnings to move it forward. They already do it in the uk, but thats a very different landscape as you understand. Yeah, and a different brand name. Finally, did Marissa Mayer who of course is on the board of walmart, which we hear so much about, did she turn up today . Reporter yes. Yes, yes, yes. And the Board Members are sitting in the front row and they were introduced one by one by greg penner, the actual voting hasnt happened yet but we know most of those ballots of course have already been cast and well know results later. But Marissa Mayer, also founder of instagram here as well. Good to see you, court. Busy day. Reporter thank you. Live from the walmart Shareholder Meeting, staff meeting perhaps more accurately. Coming up exclusive interview with jonathan tisch. Were talking hotel growth, tsa, much more. Stay with us. My mom loves giving me advice. She even gives me advice. About my toothpaste and mouthwash. But shes a dentist so. I kind of have to listen. She said jen, go pro with crest prohealth advanced. Advance to healthier gums. And stronger teeth from day one. Using crest toothpaste and mouthwash makes my. Whole mouth feel awesome. And my teeth are stronger too. Crestpro health advanced. Is superior to colgate total. In these 5 areas dentists check. This check up . So good. Go pro with crest prohealth advanced. Moms right. Again the major ceos gather in new york this weekend for biggest deal making get together of the year. As they do so though data continues to indicate growth is slowing across the u. S. Hotel industry. And of course this mornings disappointing jobs number may only add to fears that businesses will further dial back their travel expenses. The host of the nyu hospitality conference is of course jonathan tisch, chairman emeritus of the u. S. Travel association. Good morning. Good morning, simon. Nice to see you. Always good to see you. Big weekend. Big weekend, we start sunday, conference itself monday and tuesday. As you mention we attract the biggest names in lodging. We have hilton, we have marriott, Arnie Sorensen focused very much on the merger happening in the next few weeks. Well have 1,500 people at the marriott in times square talking about the current state of affairs in the lodging industry. And we will be live from that conference. I know, youre broadcasting there on monday. Its an important indicator. Well talk about the general economy in a moment, but as far as the lodging industry is concerned, you have a split between what the stocks have done, what the analysts and the investors fear and an industry that still tells us everything actually is okay. Its not as bad a split as it was in january, but still a huge issue. Where are we on jobs and fwroet . I think everything is okay. Yes, we see what the analysts are saying. And we see the price of the stocks, but business is still good. And our industry combined with the larger travel and Tourism Infrastructure still has the ability to create jobs. But we have to lessen the barriers to make it difficult for people to come here. We have to make sure that we are focused on infrastructure in our country especially as it relates to travel and tourism so people can get through our airports, get to the destinations they want to. And continue to have support from whichever administration is in d. C. So that we will continue to create jobs. You very often make that case at the beginning of a conference when youve made your investments. You rationalize where that money should come from . Look at laguardia, starting very soon publicprivate partnership, you can make these deals happen. We need to rebuild our infrastructure or other people and other countries are going to take our travelers. Can you help us about what is going on in the broader economy at the moment . A day like today when people are so worried about the lack of job growth. Maybe its just a oneoff this month or is it a broader problem, do you think . Certainly if you look at retail, theyre suffering. But that same consumer is spending as it relates to travel. They still want the experience of getting on an airplane, going with their family, attending a meeting, Group Business is still very strong. If you look at our group properties, theyre doing extremely well because of the strength of the group traveler. The group area though is the one area that if ceos are going to cut back on, theyre going to slice, is it not . Historically that has been the case. My question is in a day like today moving forward what do you think we havent gotten any cancellations today. No, but ceos look at whats coming maybe theyre focussed on the election, travel, Business Travel is oftentimes the first thing to go. F we have a new Hotel Opening in orr lan don, on the grounds of universal studios. 1,000 rooms with 115,000 square feet of meeting space, the forward bookings are very, very strong. Youre going to have most of the industry together, what is their posture right now regarding nontraditional lodging, airbnb, all these other thin things . Are they having a measurable impact on the industry . Certainly depending on the market the impact is stronger, depending on the price point the impact is stronger. So youre having a sense of cities like new york, which may be getting to an overbuilt situation very quickly because weve added some 30,000 rooms in the last ten years. There are 20,000 new rooms in development or under construction. So right now were at about 109,000 rooms. Airbnb is having an impact in new york. Youre starting to see it in markets like miami. Miamis impacted by the strong dollar, by weakness in south american currencies and south american countries. So it depends on the market, but it is definitely having an impact on the industry. And when you start to see the megs gas get even bigger, marris and starwoods, i would think their philosophy would be how do we combat the shared economy we live in and move Forward Together as a stronger, larger company. John, im somewhat surprised to hear you think new york could potentially be getting near overbuilt levels. I mean, what does that mean in terms of your strategy and or anybody else operating in the city. Youre in a good position to talk about it. Physically were in a great location. Weve got a great product. But what youre seeing in new york over the last couple of quarters is negative rev par growth. We still have the numbers in terms of travelers, some 60 million visitors this year in new york city, but negative rev par growth, so were not able to raise our rates. And at the same time our expenses keep going up. Labor, energy, taxes. So there is pressure on the bottom line for those of us operating hotels in new york city. Do you worry at all about a Trump Presidency in terms of if he follows through on closing the borders to a certain extent or alienating certain people who might have otherwise traveled here . We in the travel industry believe in secure borders but open doors. We want to ensure that people, their families if they want to come to the United States, we have to facilitate travel so they can come here, enjoy our amazing country, spend money and create jobs. We do that by more people coming in, not less people coming in. So many questions but we have to leave it there. Thank you. Thank you, simon. Have a great conference. Thank you. Jonathan tisch from loews. The economy adding just 38,000 job, less than a quarter what the market had hoped for. Well get reaction from Goldman Sachs chief economist jan hatzius next on cnbc. Thank you. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 59. 95 a month. Comcast business. Built for business. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. Dow down 136 points. Welcome back to squawk on the street. Time to get the latest News Headlines with sue herera back at hq. Good morning, sue. Good morning, simon. Heres whats happening at this hour, everybody. France hosting top diplomats from the west and arab nations, including secretary of state john kerry. Theyre trying to organize a peace conference by years end, which would restart israelipalestinian peace talks. French president Francois Hollande delivering the opening address. Iraqi forces continuing their push into the isisheld city of fallujah. Officials say they have secured its outskirts. Iraqi officers say the large number of civilians leaving the city are slowing down the military operation because it limits their air strike capabilities. A vigil was held thursday night for a ucla professor killed by a former graduate student. Hundreds of students gathering to remember professor william. The shooter claim ed he had stolen a computer code. And teaming up to produce bottled version of tevana tea. The ready to drink tea will be available next year at supermarkets and convenience stores. And that is the news update this hour. Back downtown, david, over to you. All right, thank you very much, sue herera. Lets get back to that allimportant and disappointing jobs number, 38,000 jobs created somewhat bleak picture perhaps for the fed before its june policy meeting perhaps casting doubt on the u. S. Economy as well and of course potential rate hike. For more joining us exclusively at post nine is jan hatzius, chief economist at Goldman Sachs. Before we get to the fed, jan, what do you think happened . Why did we fail to create near as many jobs as people anticipated . I think there are two possibilities. More likely one is this is an outlier because its not really consistent with vast majority of the other indicators were getting. Were not seeing a spike in claims. Were not seeing a big deterioration in household view the job market. We have seen some weakness in some of the Employment Creation indices for example in the nonmanufacturing ism, but in general this looks like a big outlier and that is my baseline. Of course it also raises the possibility that we really are seeing more of a slowdown and that al at a minimum the fed will have to wait to raise rates. Do you have concern about Economic Growth . Yeah, i mean, i think what you can say is that it wasnt just one weak number, if you look at the seasonally adjusted may number, but they also revised down prior months. I mean, thats sort of a consequence of how they do seasonal adjustment when they find a very weak front month number some of that gets distributed back. But, yeah, the message from the payroll number is quite weak. I mean, hours were fine, wages were fine, Household Survey is more split. Small employment gain, but a drop in the Unemployment Rate. Yeah, thats because 458,000 people leaving the workforce. Thats a very large number as well. True, though youd seen big increases there until a couple months ago. I think you can say some of that is probably payback. Whats interesting is that if we were to find over the next, you know, month or two, that this payroll number really is an outlier and otherwise the economy is still doing, you know, fine, still creating jobs. And the only net change is that we have a significantly lower Unemployment Rate, that actually would be i think an Important Development for the fed. But right now theres more uncertainty. You know, jan, maybe one benefit of this weak number is we no longer have to resort to this fear of the british vote about exiting the eu as one reason why the fed might not move in june. It really is about the u. S. Data right now. Is one more payroll report in early july enough to give them the data they need to make that call in july . I think it may well be. It may well be, i mean, we have a 40 probability, you know, judgmental probability that they will go in july. I think we do need to see though not just in the next payroll number but also other indicators between now and the july meeting that this really is an outlier. If that doesnt happen, then they will wait longer. Janet yellen speaks on monday, i think. Thats right. We should get further clues then. Where are we as far as concern with the labor market . Is it an ongoing test each month, or actually crossed the goal post . In other words if we are at below 5 in the Unemployment Rate, is the job done as far as employment is concerned . I think theyre on record as saying 100,000 job growth is all that we need demographically. That would be a normal state of affairs, which of course the threemonth average. In other words what im saying is when you see the dollar move like this, is that move perhaps unwise and the fed is still going to hike rates . I think thats a good question. I mean, i think for june the answer is no, they wont hike rates. But i think its a good question more broadly whether what were finding here is partly that were just basically at full employment. I think the indicators on that are a little mixed on balance i would say were not quite at full employment, involuntary parttimers and marginally attached workers still at 9. 7 , still a little on the high side, wage growth still somewhat below normal level. Many you may not be able to right the ship. You cant be absolutely sure that those im just saying my baseline would be there probably is still some slack, but its possible that were partly finding that were just running out of, you know, the sort of employment gains that you see during a recovery . Is there a figure on full employment . A Percentage Rate . Our estimate for the just the Unemployment Rate leaving aside all the other indicators is at 4. 7 . So were on full employment. On that one measure, yes. But there are these other measures. Does that mean were going to get wage growth then . Even above where we are right now . I would expect it to pick up somewhat further. Were now running about 2. 6 if we take an average of all the different indicators, not just average Hourly Earnings. I think that probably will move up further and still has a little bit of ways to go before were at normal. Spend a lot of time talking about the way jobs play into what the fed wants to do. Trying to get something more done for other reasons outside the labor market . Do they want to build up a bit of a rate cushion in some sense . You mean in order to be able to cut again . For what they believe is a version of normal to keep the Financial Markets from getting over confident that were going to stay near zero for a very long period of time . I think the main reason is they want to basically achieve a soft landing. They want to transition to basically trend employment growth roughly at the time when the economy hits full employment, maybe probe how far you can go a little more. But i think thats the main thing. The other things are lower down on the list. Let me ask you one final question, if the election were to impact job growth in this country, as a fact based analyst, what facts would you look at to confirm that was happening . I think i mean, i think its going to be pretty hard to really find that conclusively from what the indicators look like because at any given point in time you never really know with 100 certainty whats going on. But, yeah, if you had a sharp decline in confidence, and that translated into a weaker labor market number, yeah, youd say this could be a factor. Jan hatzius, thank you very much. Chief economist Goldman Sachs. Coming up, j. P. Morgan chase Ceo Jamie Dimon sending a possible message about brexit. Why it would be a terrible deal. Squawk on the street will be back after a break. In a world held back by compromise, businesses need the agility to do one thing another. Only at t has the network, people, and partners to help companies be. Local global. Open secure. Because no one knows like at t. Were taking a look at one of the hottest chip stocks out there. Its in video. Theres a lot of short interest, but the stock has been soaring. Will it continue, or is there downside to be aware of . That and more on tradingnation. Cnbc. Com. More squawk on the street coming right up. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. J. P. Morgans Ceo Jamie Dimon warning on brexit this morning speaking to some of the bank staff in the uk alongside the uk finance minister. Mr. Dimon sent a warning that the bank could cut up to thousands of jobs in the uk if it votes to leave the European Union on june 23. So if for today we can service eu companies here, freely, with systems, technology, research, investment banking, sales and trading, we can do it here. After a brexit we cannot do it all here. And we will have to start planning for that. I dont know if it means 1,000 jobs, 2,000 jobs, could be as many as 4,000. And they would be jobs both all around the uk and as you know the most important thing for me is were going to take care of our people. Were going to take care of our people, and were going to take care of our clients. I dont want you to worry abt, but when you vote you should be thinking about Something Like that. Of course all five of the big u. S. Banks operating in the uk are known to be considering their position. J. P. Morgan for its part has 16,000 employees in six countries in the uk. With the dow now down 109 points, lets send it over to Rick Santelli in chicago for this mornings exchange. Rick. Thanks, simon. You know, historys a funny thing. We had a great discussion on squawk box this morning about the conditions for a tightening by the fed, well, theyve never tightened under current conditions. Whether its the slide in growth, all the various variables that of course the fed considers. Maybe, you know, anybody ever try driving by looking backwards going 60 Going Forward . You know, we have to quick looking backwards. And we have to quit having policymakers pick and choose based on historical extremes. In other words, just because weve never had this setup to raise rates doesnt mean we shouldnt. Theres a lot of things weve never seen before with regard to history. The negative rates, the Balance Sheets of all the Central Banks, the quantitative easing. Lets even break out the bank of japan from other Central Banks, theyre now one of the most valued customers in a lot of exchanges because of how much they are buying. The eurozone, it goes without saying they have negative rates almost everywhere you look. What about those extremes . If we could look towards history and say weve never had these conditions for raising rates, why do we create all these conditions weve never seen before to fix it and we dont ever consider refraining from those . Makes no sense. Lets look at a Little Common sense. Okay. Ought to be put in a trash co compacter. Data dependent, long measure of time, they have trapped the Federal Reserve. Lets all be a bit frank here. Okay. We have a spiral going on where the expectations of Central Banks trump everything. You get a negative data point like this, everything moves huge. You get more negative rates, listen, you think major financial institutions, you think jamie dimon who was just on that clip is going to do better in negative rates . You think these unhealthy banks in europe are going to do better with negative rates . This spiral is crazy. Its crazy whats going on. We get negative expectations, we get numbers, we see markets move on what the feds and Central Banks will do, that makes rates more negative, it makes outcomes more negative. And it brings it all back. And we keep going deeper and deeper and deeper. Data dependent ought to be tossed because theres a lot more at stake here. And i know Central Banks they probably have their hearts in the right place, they dont want us to experience any discomfort. Well, let me see, if we keep going negative in rates, if you have a pension, youre going to have discomfort. If you have a mutual fund, youre going to have discomfort. If you have money in the bank, youre going to have discomfort. Its just a matter of whos whats this comfort time hits. Well said, rick. Coming up on the program, warriors living up to their name as the defending nba champs beat the Cleveland Cavaliers in game one. How much did it cost to witness the rematch firsthand . Youve got details next on cnbc. Great time for a shiny floor wax, no . Not if you just put the finishing touches on your latest masterpiece. Timings important. Comcast business knows that. Thats why you can schedule an installation at a time that works for you. Even late at night, or on the weekend, if thats what you need. Because you have enough to worry about. I did not see that coming. Dont deal with disruptions. Get Better Internet installed on your schedule. Comcast business. Built for business. The nba finals are under way and with the tickets taking off with each increasing final, we are told this is the most expensive one yet. And so, jesse, the most expensive ever to attend an nba finals . Yes. And how much in each venue . Both venues are over 1,000 which is the second time we have tracked that. Last year was the first, and oakland is about 1,7p 00, and cleveland is about 1,200, and so cheaper in cleveland, but still expensive. And 1,700 for golden state and oakland and how much up . Just over 1,500 last year in oakland and so it is surprisingly up in oakland and down in cleveland. Last year in cleveland, it was 1,400, and 1,200 for this years, and you would think the other way, because the big three are back for lebron and you would think they have a better shot. But somehow the novelty for cleveland has worn off after the drought. And looking at the arbitrage from the bay area to cleveland to fly is 400, so it is equal . Yes, if it is an opportunity to see a clinching game if cleveland, yes, it is a possibility, and you might want to save your dollars if you are a warriors fan and want to see it. This is obviously huge, bi birdjohnson, 2016. And the nba is thrilled with the ratings through the roof, and the prices are right there as well. And the e foe no, maam na and everything coming together for golden state, and not just the team being great, and curry breaking out the way he has, but the entire tech universe has decided to embrace this team, and so much money behind it from that angle. Absolutely. The owner of the warriors is really a kind of the model of the tech entrepreneur mogulle team owner, and there seems to be no limit for the warer yos. They wob last night, and we will see if they can kind of see it through, and get number two for the bay area. And you also track what it costs for each arena just to get in. And to basically, the cheapest ticket in the secondary market . Yes, and the cheapest ticket in each market is 500. And it is interesting that while the averages are higher, to getin is the same in each market, and so it is still not crazy, i geuess on the relative basis to get to the game, and snit the very back and be part of history, and we atticiq, we look at seat smart and others that we brokerage to, so it is a wide range and good idea to shape around, and if teams like the Cleveland Team continues to lose, it will be varying. Any particular section . The cheapest value ticket is 200 so it is 1,100 increase relative to the face value for anything of the game. And giving up a few seats in an nba ar rena versus a super bowl, but going back across the sports whether it is the world series or the super bowl and how does this ran sfk. For the super bowl, you wont see anything below the 1,000 averag average, and for the nba finals, that is the upper end of the range, and the ditto for the nhl stanley cup finals are both below, san jose and pittsburgh are both below 1,000 averages. And the nfl, because it is one game, it is so hyped that 1,000 is a big deal, and in the nba, 1,000 is a lot as it is in the nh lsh nhl. And in the nba and the nhl, you wont get a lot of the Corporate Group travel the way that you do with the super bowl . Well, a little bit more in the nba, because it is stardriven league, but the nhl is a local rt sport, and nhl is the best attendance rate if you look at all of the sports in the course of the season, the highest fill rate of any league, and so it the fans all season that have been seeing the team play. Do you think that it will change over time, and the profile of nba corporations will change as the value moves to tech firms . Sure. To the point that you were making earlier of the people embracing a local team. Well, it depnds where it is in oakland and san francisco, absolutely. And cleveland is trying to figure out what is next after a tough few decades here. And lebron is a big shiny hope, but on the jobs market, the Unemployment Rate is up, and oaklands is down, and so it may be explaining the price disparity. If we get to the game seven courtside, what will that run many me . Any guesses . Well, you could spend 25,000 without trying too hard. Okay. Simon, you are up for that. Okay, david. We will put it on simons. And that game would be in . That would be in oakland. Yes, the game one. Okay. Thank you very much. Tracy lawrence from tickiq, appreciate it. Time to go over the jon fortt for what is coming up on squawk alley. Well, simon, continuing fallout from the dismal jobs are report, and what it means for the economy and tech, and we are at walmarts Shareholder Meeting and it looks like uber and lyft are going to be delivering the groceries, but it is not all about u. S. Share, and didi from over at china is going talk to us about what she has planned strategically. All of that and more is coming up on squawk alley. Or jerry getting dumped every third tuesday. Jerry every third tuesday. We have Pattern Recognition Technology on any chart plus over 300 customizable studies to help you anticipate potential price movement. Theres no way to predict that. Td ameritrade. And i thought, well, you need to go to the doctor. I was told that is was cancer, and i called Cancer Treatment centers of america. Dr. Nader explained that they can pinpoint the treatment. Once we identified that there was this genetic abnormality in her tumor, we were able to place her on very specific therapy. Our individualized care model gives each lung patient specific Treatment Options with innovative procedures that are changing the way we fight lung cancer. We have Excellent Technology that will allows us to perform very specialized procedures for patients who have lung disease. 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We are off of the lows on the dow, and partly because the fed is thought less likely to raise the rates this sum me, and where you are seeing the move is on fixed income and notably Foreign Exchange where there is a massive pummeling of the dollar which is sending the euro and the sterling higher and the japanese yen, which is a problem, because it adds more pr pressure on the European Central bank to ease and go further into the unchartered territory the send the euro in the other direction, and that is in itself going to wash back removing arguably some of the price incentives with the lower rates here. It is a complicated situation, and not the merriest of situation, but that is what it is, and so we hand it over to kayla and the squawk team. Meanwhile, it is 8 00 a. M. In fayetteville home of the walmart Shareholders Meeting and 11 00 a. M. Here on squawk alley. When im feeling down so i turn around oh, baby dont care no more i foe this for sure good friday morning, everyone. Carl is on assignment, but jon fortt has made his way back to post nine. Glad to see you. Good to be back. And also this hour, we will have mike santole and business insoo insider and founder henry blodgett, and