Bofa's Harris Says Bond Market Has Been Too Optimistic (Audio)

it over at Bank of America Merrill Lynch. Enough to relieve fed policymakers that the economy is not losing steam as that may number may have suggested, but not enough to eliminate worries about global downside risk. PIM yes, and non farm payrolls rising by a seasonally adjusted two hundred and eighty seven thousand in June. That's the strongest month

of hiring since last October. Right now, let's go to Charlie Pellart in Bloomberg whose room for a Bloomberg business flat, and thank him, Thank you, Kathleen, all about jobs are Coverage continues right here on taking Stock, but markets responding best level of the day right now, the now at eighteen thousand, one hundred forty nine. It's up two hundred fifty three points now again of one point four percent.

SMP five hundred index up thirty one again also of one and a half percent, and has stack ups seventy seven points again there of one point six percent. The tenure of five thirty seconds yield one point three six percent. As you guys mentioned, the Labor Department said employers added two hundred eighty seven thousand jobs, far more than the economists survey by Bloomberg were expecting. The jobless rate rose to four point nine percent as more people entered the

labor force. Wages did advance less than projected. Bill Gross, his fund manager at Janis Capital, He says June's strong job report probably won't change the Federal Reserves decision on when to raise interest rates. You know, they still have Brexit to look into the eyes of the whites of the Brexit eye. I guess they have problems with Italian banks, so the Fed doesn't, but the uh, the e c B and the you do, the problems with the UK

property mutual funds. Uh. You know, there's a sense of illequdity and markets and and the Fed of course is very obsessed and concerned with markets, and right now markets are with the Dow Industrials up to sixty a gain of one and a half percent, Gold down by a dollar to thirteen sixty one to drop there of point one percent. Crude oil holding about forty five dollars a barrel up twenty one cents now forty five thirty six on West Texas Intermediate, a gain of point five percent

to thirty two on Wall Street. Now, let's take a look at other news from around the world. Thank you, Charlie from the Bloomberg news room. I'm Ramy in a Cento. One of the suspected gunmen in an ambush that left five Dallas police officers dead has been identified as twenty five year old Micah Xavier Johnson. That's according to reporting in multiple media outlet. Johnson reportedly served in the Army

Reserve as a carpentry and masonry specialist. He was killed by an explosive strap to a police robot after hours of negotiating with police. Three other suspects are being detained by police. Texas Attorney General Ken Paxton is calling the attack on Dallas police calculated. He told ABC News people should be on the lookout for potential copycats. People need to be on guard for potential attacks and other places and and maybe here, So I think we're definitely on

a higher alert here and around the state. President Obama is in Poland, where he commented on the shootings is that there has been a vicious, calculated and despicable attack on law enforcement. Police and ballast were on duty during doing their jobs keeping people safe during peaceful protests. Mr Obama also called last night a wrenching reminder of the sacrifices law enforcement officers sometimes have to make. Five officers

were killed and seven others were wounded. A judge in the George Washington Bridge Lane closing case has ruled against providing access to Governor Chrissie's cell phone as part of pre trial preparation. The U. S. District judge granted a motion by the law firm representing Chrissy's office to quash a subpoena by former allies Bill Brownie and Bridget Kelly. Global News twenty four hours a day, powered by more than twenty journalists and analysts in more than one under

twenty countries from the Bloomberg News Room. I'm Rami in a centio Charlie, and we thank you, and again recapping down industrials up two hundred sixty one points, a gain of one and a half percent, SMP five hundred index advancing thirty two points again narr of one and a

half percent. I'm Charlie Pellett, and that's a bloom Bird business flash during listening to taking Stock with pin Box at Gatlee Hayes on Bloomberg Radio at tightening job market, it's put up with pressure on wage growth as employers compete for an ever smaller pool of a A level workers.

Average hourly earnings for private sector workers rose by a modest two cents two cents in June dollars and sixty one cent satis of about two and a half percent compared to a year earlier, but the wages were up two and a half percent compared to matching the fastest

annual growth rate since July two thousand nine. Here to tell us what this means for markets in the economy, Ethan Harris, Head of Global Economics, Bank of America, Merrill lynch Ethan Harris, thanks for being with us, so I give us your impression of the wage growth and what that would mean for GDP growth in the United States. Well, I think what we're saying now is the beginnings of the end of the job recovery. In other words, the beginning of a period where workers get a little bit

of negotiating power, a way to start picking up a bit. Um. You know, we've been stuck at two percent wage growth for years now. Now we've moved up to about two and a half. I think it's going to take a couple more years of health jobs to get into more normal three and a half percent or so wage games. But you know, I think we're finally there at that late stage of the cycle where workers get get a more balanced relationship with their employers. Um. This is good

news for the economy. UM. It's telling you that there's been a real healing process here. It's taken a long time, but UM, you know, FED policy is working. It's just working very slowly. So basically, um uh Ethan, when you look at the trajectory of jobs growth, it was stronger at the end of by a good margin. And that's

why the FED. One of the reasons when they came in looking to high grates four times this year, UM by Marcia, was all the market and certainty right, and they cut back, but that the pace of job growth is also lost momentum. This was not a particularly strong it wasn't such a weak quarter for jobs growth, but it's one of the least strong we've had in some time. How are you sure that there isn't a loss of

momentum here? That is going to be vulnerable too, As you point out in your your note today global downside risk, you say that things will be watching that well. I think if you look at broadly at the data in the last few months, actually there's been a slight pick up overall, So I think you're right that payrolls have slowed down fundamentally. I mean they're now running it about a hundred and fifty thousand a month on average, and they were running and well above two hundreds. So there's

been some loss of momentum there. I don't think that that was sustainable to be creating that number of jobs in an economy growing two But if you look at the rest of the economy, you look at better retail sales, better survey measures like the Purchasing manager survey, um overall g d P in the second quarter looks like about two point six percent growth. So you know, there's a little bit of improvement going on in the underlying data, even with the labor market slowing down a bit. All right,

so improvement there. But tell us about the manufacturing sector and inventory bills, because it seems as other manufacturing sector has been moving in a different direction than the service economy. Yeah, I mean we're still feeling the effects I think of the strengthen the dollar last year. Um, I mean, this is a tough environment for manufacturing. You had very sharp move up in the dollar, making us products less competitive globally.

It was also an environment where you had a collapse in the mining sector, which uses a lot of manufactured products. So the mind of the manufacturing sector is kind of in a very slow motion recession. The rest of the economy is doing fine though, and remember manufacturing is only a little over ten percent of the economy, so it doesn't normally drive the economy, even though it can be

quite volatile. Even uh, speaking of the feder Reserve, the Marcus don't see a rate height the rest of this year.

And you get this this September on our our w I r P page on on the Bloomberg and there's still not an implied probability that gets to is the market wrong or are we in some kind of stasis where yeah, jobs are growing and maybe we just will rise a little bit more, but inflation is not going to rise much, and the Fed's going to look every month and say, dang, we'd like to move right set, but we don't, we can't or we don't need to. Yeah, well, maybe you need to rename that the r I P.

Because it seems like the FED is dead. But all right, pretty good joke there, right, Um, But I would say that the market is slightly under pricing the Fed. I mean, we think the Fed by December will be ready to do another hike. Um, so you know they'll move. Well, that sounds like a big difference from the markets, but it's not that big a difference. What's going on right now the FED is that they want to be able

to check all the boxes before they move. They want to be able to say the job markets okay, the economy is okay, inflation is picking up a bit, and they want to be able to say there's no systemic problems in the global economy or markets. When they feel comfortable with all three of those things, then they move ahead and hike interest rates. And that's why I don't think they're likely to hike in the next few months, because they really wanted some time to kind of get

get these wounds behind us um. But I do think eventually they'll hike again. The bond market. I think, you know, it's a little too optimistic about the Fed being completely out of the picture. All right, Heathen here, thank you

so very much for joining us today. Head of b of A Maryland Global Economics even says the economy, this is a good news report today in jobs, solid footing, moving ahead, a little bit, better wages, and he's looking for that interest rate increase from the Federal Reserve in December. This is taking stock and this is Bloomberg. The Hampton's

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