This is breaking new loose from Bloomberg. Last month was one hundred and fourteen thousand. It is revised under one hundred thousand, eighty nine thousand positive eighty nine thousand, So I've got one hundred and forty two thousand is the jobs report and the two month revision is eighty six. So Paul, do the math with me. Six takeaway one who is thirteen eight is fifty one thousand, yep, I think fifty six thousand, excuse me, fifty six thousand positive
is the summation with the revision. We job on along here, folks, to give Neil Dutta time to look at these statistics.
Neil, what does this signal for Chairman Powell?
Get going? That's what it says, go fifty with a promise to do as much as necessary to stabilize labor market conditions.
So again, Neil, I mean, and you think about these numbers and the revisions as to almost just summarizing here the labor market, I guess it kind of falls into what we were just saying many minutes ago, not nearly as strong as people think it is.
No, I mean, the.
Three month trend on non farm private pails is running below one hundred thousand. I mean, that's not a good number. You know, that's barely break even, and I think it's arguably actually worse than that because one of the reasons why the number even looked as good as it did is because we saw an uptake in construction employment among I think civil engineer contractors. And so that's not going to last because everything we know about construction right now
is that units under construction are under constructure collapsing. So why are we hiring all these people to build one exactly that That implies a margin squeeze for builders, which I don't think they can tolerate right now. So I think it's the goods producing side. I mean Tom mentioned benfacturing. I think that's notable because a lot of people were thinking maybe you'd see some uptaking manufacturing because of the unwind of the retooling.
It just didn't happen.
Right on the good side of the economy's week, cyclically sensitive industries are sluggish, and you know, this is all about the FED trying to create a handoff from income lead growth to credit led growth. That's what this is about. So they need to keep cutting until the credits active area of the economy turn.
Joining us worldwide.
Neil dotta, we are commercial free to the nine o'clock hour. Claudia sam Mark Zandi will join in a moment. Ben Ladler will join us on the equity market reaction in the view forward here Later in these twenty minutes, futures at negative seventeen, the vixers A twenty two level comes in nicely twenty point seven six. Major bond market adjustments
make it eight basis points. Two year yield three point sixty six thirty year bond well under four percent, three point nine eight percent, ten year yield three points sixty seven percent. Neil, I want you to frame out for us what inflation will do given a depressed GDP in the job market, moving the second derivative here is moving to a worser space. What does inflation then do further disinflation.
I mean absolently, I think so. I mean if you look at core goods, not housing services, and housing rents, I mean those are those are the three ways to slice the inflation data. The entire shortfall relative to the FEDS target is in housing rents, which we know will continue to normalize given the lagged You know sort of nature of that indicator relative to market based rents. Everything
else is basically normalized. So you know again, I mean, what's the upside risk for inflation if growth is running below potential and the momentum under the unemployment rate is higher. I mean that's kind of it's kind of I mean, unit labor costs are running basically flat for the last year, so there's no more of an inflationary impulse coming out of the job market. That story is completely over, and the FED continues to run a very very restricted policy stance.
Well, Paul, get one more in here, and Neil, and you know, the unemployment rate, just for those that are gonna be watching the headlines, stay steady at four point two percent here, right in line with expectations. What does the FED think about an unemployment rate of four point two percent? Do you think?
I don't think they should think about an unemployment rate of four point two percent. I think they should think about what's gone on over the last six months.
Here you going, what's gone out?
That's absolutely Neildudda, I know you got a publish, will feature that out on Twitter.
Neil Dudda with Ron Mack will publish.
We thank him for careful market economic analysis. So now bring you Claudia S'm chief economists New Century Advisors, and doctor Mark Zandi, chief economists at Moody's. We had them on here, oh thirty or sixty days ago, can't remember. It was just lights out, great, great analysis, Claudia. I want to get this out of the way so we can move on to the real Claudia, Sam, I'm sick of the palm recession. Pinata, Can you just give us an update without tire and feathering your reputation? Are we
close to a recession? Doctor somem?
So they increase the unemployment rate is in a range where we have historically been in recessions, right, But that's a history, that's a past.
We're not in a recession right now.
But we do have a weakening labor market, right, So that's the important takeaway.
But like, not a recession right now, but a risk as risk.
And what I remember from two thousand and eight is a Zandy rule.
There's a Psam rule, but there's also the Zandy rule, which is to be optimistic about America, Mark Zandy, if we get the deck of cards, I hear from Neil and others in you frankly at Moodies as well. Can corporations adjust and sustain off of a lower nominal GDP decent revenue and decent earnings or do you just suggest everything goes.
Down, Tom, I think they're doing just fine. I mean, looking at corporate earnings, they feel pretty good. I mean, through Q two of twenty twenty four, double digit ear or ear growth, and you know, expectations of analysts always are on the high side, but they're still pretty good as well. So I think the economy is doing fine and producing enough enough revenue growth to keep profitability going strong.
So yeah, I'm not worried about that. And you know, just broadly, yeh, you know, I'm all on board with the view that the BET should be cutting rates and normalizing them very quickly. But today's report I thought pretty much down the strike zone. I mean, you know, the kind of right underlying job growth is one hundred and one hundred and fifty k that's kind of where you want it. Four point two percent unemployment, that's kind of
where you want it. You saw a tick up an hour's work per week, that's, you know, feels pretty good. Wage growth is almost exactly where you want it. I mean, yeah, you can just put hairs. Come on, what are we going to say this? This is a good report, this was this felt like a really good report to me.
Is it to the point there marked where the FED can stay at twenty five basis points or is this something that some are suggesting may push them to a fifty basis point cut in September.
Yeah, I think it's twenty five. I mean, I would expect the FED to cut fifty only in emergency if you know, markets are really evaporating or there really was some serious deterioration in the economy, job market. But I
don't see any of that. So I think it's a core point, and there's you know, I think there's good arguments to cut and cut in a consistent way, but I don't think we need to dramatically cut all at once, because there's a lot of uncertainty as to reasonable uncertainty as to you know, where the FED should be going here. What is the so called equilibrium federal funds rate? What's
the rate where policies either supporting or restraining growth? That is very uncertain, And I think given that, I go obiously unless push to do otherwise, And in this report. I don't see any reason to feel like they have to move very quickly.
Here, Claudia.
Over the weekend, you'll be at some fancy cocktail party and somebody's can come up to you and say, hey, Claudia, how's the US labor market. What's your response?
It's not headed in the right direction. This is the thing I am most concerned about. Again.
Just you know the numbers, like the numbers themselves. Okay, fine, It's just things have been slowing and we can and not because I am you know, hair on fire, that are recessions around the corner. I'm really concerned that we're losing a slipping away of a.
Really good labor market.
And we need this as good as it gets and there should be nothing weaker than what it takes the get inflation down. And we are like the train is still moving and is not in the right direction.
I mean to both of you, and then, folks, we've got huge academic caliber here. Mark, I'm going to go to you first, and then Claudia. Is the same question the ECB is trying to teach us about being non measured. Are we slaves? Mark Sandy to a green spanny and measured approach, careful, careful, careful. Why can't we go X beeps or why beeps or Z beeps and see what happens? Why can't we do that?
Mark Sandy, Well, I don't know Tom that you need to. I mean, if the you know, the labor market was falling apart, yeah, absolutely, If you know financial system was in turmoil, yeah, i'd move quit more quickly. But you know, the economies, it's throttling back. But that's exactly what you'd want to see, to throttle back it, for it to throttle back here it's been growing too strongly and it's kind of coming right into where you want it, and
no reason to to move quickly otherwise. And again I keep going back to I don't think anyone knows reasonably so where we're headed here. You know, it feels like I feel like the equilibrium rate is higher than it has been typically. Uh, and it's moving, so you know, why not go cautiously and you know, if things start to really deteriorate, if you know, we do start to see really significant job loss or or even very weak job growth. Hey, one other quick point I wanted to make, please,
you know the August data is always weak. You know, we get very low response rates, initial response rates in the month of August, I think for obvious reasons, people are on vacation, and we always get an initial print that's on the sauce side. And almost invariably, if you cast me back a year from now, we're going to be talking about upward efficients to the data. So you know, you just have to take that into consideration.
Claudia, I got a scree month moving average of one hundred and sixteen thousand, three hundred and thirty three one one six three three three. I'm sorry, but that's way below anything I've seen as a normal rate of unemployment if you take the screen month moving average Jason Firm and I'll help out on this at Harvard. I'm sorry, Claudia, is measured in place or is this a fed that's got to go and hoc forward?
Well, I think again, it's like looking at how the variables are changing. The unemployment rate has been rising. Yes, it is still relatively low historically.
We also have an older workforce.
Four point three percent is not that far from and experienced and esteemed right, and so there's no magic number with the unemployment rate. It's watching the dynamics. It's watching the change and knowing that once that changes in place. The FED has been trying for two years to cool off the labor market. That's why the funds rate is at five percent and other types of demand. Right, so, yes, things are cooling off, and now it's like, okay, now we need to slow.
We need to turn that around. We don't need that slowing. So I think that changes everything.
Wonderful, Zamon Sandy with us right now. They move the market higher.
Futures negative thirty now negative twelve, deterior in the Sweeney yield two year yield from negative seven basis points down to negative nine. Those levels three sixty five, two year, three sixty eight, ten year, thirty.
Year bond hut or four percent. Paul you home shopping this weekend.
I might be absolutely red headline crossing the Bloomberg terminal. Traders pricing fifty percent chance of half point FED cut this month, crossing the Bloomberg terminal, Mark Sandy. Given the labor outlook here in some of the data we got today, as it relates to total payrolls and wages, what's your view of the US consumer here? How healthy or how at risk is the US consumer, I.
Think and aggregate, you know, looking across all Americans, they're continue to do their part. They're hanging tough. I mean, the train is being driven by folks in the top part of the income distribution. And you know, I don't know, I don't think it's hyperperctly, but their financial situation is probably as good as it's ever been. You know, got a job, strong, real wage gains, They own stocks, stocks or near record high zone home home vows or near
record highs. If they've got any debt at all, it's a thirty or fifteen year or fixed rate mortgage locked in And seems like everyone I talked to us mortgage is at two and a half or three percent kind of locked in. So I again, and in my by my calculation, they still have some excess cash that they build up during the pandemic when they couldn't spend that they're spending down now. So I think they're fine. I do think the soft spot obviously is lower income households.
They clearly are struggling. You know, they got nailed by the high inflation. They took on a lot of debt to supplement their income, to maintain their purchasing power. And it's one thing when rates are low, but when rates are really high. They mean, the credit card rate is twenty two percent, a record high. That's very painful. They don't own stocks, they don't own a home. They rent, so,
you know, very different kind of perspectives. But you know, at the end of the day, it's the folks in the top middle parts of the distribution that here we are critical here.
I mean, I mean, I can't keep up.
I tried to get John Williams on the show, Claudius, Mark Sandy, John.
Williams, that would have been good.
New York Fed President John Williams says, now appropriate to lower FED funds rate, Claudia, when you were studying this in Michigan, this this this ex post lag Is this unusual the way our FED is acting.
Yes, particularly in the way monetary policy is quote unquote supposed to be done like in the theories, right, but that's a very clean, not realistic state. I understand why the FED when tools start breaking down and data don't make as much sense, then you kind of you, you know, crawl your way along and you want evidence. I think this FED did lean into a very FED like tendency of being super super cautious, and they have been kind of greedy in terms of how much data they wanted
on inflation. And if I had to hear so many times. We have the luxury of time because the labor market is so strong, it's like, well, well guess what it actually wasn't as strong, and so there's a cost. Like they took time to get comfortable with inflation, but that probably means they do not have time to get right.
Is the lever market really weakening?
Like they may need to recalibrate some and get going I think would be the appropriate But.
This, this is really outside of their playbook. So I understand why this is a hard case to make.
Doctor Xandy, your opiniata for the Gloom Crew, I mean seven eight oh nine, you said, everybody shut up, We're going to fix this Zandy pandemic. Everybody shut up, We're going to fix this. Give us an optimistic touch here on how America will clear these traumas post pandemic, Shinas slowing down, Claudia Sam's cats are miserable. Mark Zandy, just as directly as you can give us.
I need some.
Xandy optimism now, or I can't get through the weekend.
Really, I've got that reputation. I didn't know that I'm that optimistic. Well look, uh just look at the numbers. I mean, top four point two percent on employment. I mean, okay, be nicer if it were four I'm I'm on board with that. I mean, it's maybe on the soft side of one point four point two percent unemployment. We're creating a lot of jobs across lots of different industries and have been for you know, quite some time. Inflation that's back in the bottle almost no matter how you measure it.
So you know, we're growing at a potential. And by the way, here's the thing that's really you know, makes me encouraged. The economy's potential is very strong. I mean, we're seeing a lot of labor force growth. Well that's one of the that's the key reason why unemployment is not tired here over the past year. That goes to immigration, and you know there's a lot of costs there, but
the benefit obviously is the strong liver force growth. And look at those productivity growth numbers, and you know, I mean it's hard to argue that whether it's sustainable or not, but it feels like there's a lot of good things happening underneath all the business formation we beginning since the pandemic hit. It's probably reaping benefit. And this is all before AI kind of kicks in. So you add of all the productivity gains, yeah, in the labor force growth,
and that's a strong growing economy and the FED. The trick for the FED here is, you know, let the take the foot off the brakes sufficiently to allow the economy to grow at its higher potential. That's a very different issue or problem. Demand we're evaporating. That's not what's going on here. So you know, objectively, take a step back and take a look around. This economy is good.
Paul, one quick question to Claudia sim because futures just went green, which is a signal. Go Ben Ladler, so quickly here Paul, go to Claudia. And then we got to drag Ben Laidler in here.
Claudia, Sam, I mean again, how do you just when you sit back, you've had a few minutes of the digestis how's it fed? How do you think they're going to digest these numbers today?
I think the payroll numbers are going to be the concern and frankly, the piece of it that I found most is concerning you are the July revision, the earlier revisions, right, that's the hiring rate has gotten too low of a place, and we're seeing it in the job gains.
And then to it.
You know, July was actually even a little worse than we thought on the jobs number, and so that I think that takes some pause.
She said, So I'm supposed to have dinner with Claudia and Jackson Hole. You know what they served.
Elk and the health's food was venison. I mean there's no fish or nothing, Claudia, some we got to go. Thank you so much, Claudia, Sam just nailing these revisions. I want to want to mention Anna Wong as well at Bloomberg and Mark Zandy, thank you so much for being where us really appreciate from Moody's his optimism on the American economic experiment. He is the bull strategist who has nailed the trip from twenty eighteen.
From Christmas Eve of twenty eighteen.
Ben Laidler joins us. Right now in this market, Ben Ladler, are you going to cash?
No, I'm just busted.
My shops just killed my keyboard head. No, I think this is a I think we're at the early innings of the bull market. I think the FED cut, which is just around the corner and which we're all sort of naval gazing over, I think is the trigger for this bull market to broaden, both by sector and by and by geography. I think the data today probably a little bit weaker than you know, bulls like I would have liked, and it's probably a recipe for a little
bit more uncertainty. But bottom line, I don't think it really changes the trajectory. I mean, this is an economy that is slowing. We want it to slow to pull forward those rate cuts. FED has a lot of room to uh to cut here. I think that will stabilize the US economy, and I think that would be very, very bullish for the rest of the world.
He's from the United Kingdom.
We should properly introduce some Ben Ladler Bridesco PBI with us right now, Paul Ben.
So again, Yeah, the same the same question I asked Claudia some Ben is, how do you think the Federal Reserve will digest this labor data today?
Yeah, so it's probably a little bit weaker than you know I would have liked probably that they would have liked me. I guess we'd all be looking for that sort of goldilocks number that last month was was an aberration. Last month probably wasn't an aberration, even though you know, the numbers were revised down a little bit. Today, I think they're probably leaning a little bit more towards fifty. But I think, bottom line, you know, they're going to
get started. Inflation break evens are at two percent. They've a lot of room to cut here if they feel that they need. I would like to see them get started, and I think the chances a fifty basis point cut probably increased a little bit. But you know, I'm not sweating the pace I think too much. I think, you know, there's a lot of moving parts here. I think overall, this is an economy which is which is slowing. But
you know, let's not lose some perspective here. I mean, this is an economy that we just had a three percent inflation GDP print last you know, last quarter, that's nearly double potential GDP unemployment just over four percent. I mean, we're coming from the start point is a very good.
Place, given that backdrop, ben given effect that we've got Rachs likely coming down, got through a pretty solid earnings period in Q two. What are the sectors at screenwall for you guys.
I think the biggest call right now is not necessarily the direction of the market, which I think is pretty well set and you know, up and to the right. I think it's more about the sectors you own and which parts of the world you own. I think this is a broadening ball market. I think Tech's being a great place to be. It's nothing wrong with Tech, but I think you know the bits of the world and the sectors that are much more sensitive to these interest rate cuts which are coming. It's not the US and
it's not Tech, it's basically everybody else. All there's are the bits of the market that we've forgotten about for the last ten years. That's I think where you know you should be kicking the ties on right now.
Ben, I don't have Apple in front of me, but you are way out front.
Twenty eighteen, twenty two, twenty three.
In all I'm here in Paul, you earn a lot of death of big tech. I am Ben Ladler, the Mag seven, the Mag eight, including Berkshire.
You still got to own them, right, Yeah.
I think so. You know, the earning numbers are decelerating, but that's still you know, no one else comes even close. You've got these fortress balance sheets, You've got these huge profit margins. You know, with all that, I can more than justify you know, the valuations. You know, but we all know that they're posting strong growth. You know, the valuations are you know, already a premium numbers. That's not I don't think where the surprise is going to come.
That's not where the sensitivity to low interest rates is coming from. It's everybody else that has those shrivel profit margins that has those you know, depressed earnings expectations, who've just come out of an earnings recession where valuations are forty to fifty percent lower. That's where I think you're going to get the bank of your buck in this sort of broadening ball market and potential changing leadership.
To sort of visit, we got to get Ben Laylor on again. Next time Tottenham wins will get Ben Leablor on. Ben Laylor.
Thank you so much with Bradesco this morning. Paul.
Your observation here, Yeah, I think, as you know, Claudia, Sam Mark Zandi kind of highlighted here. It's still a strong, fairly strong labor market, but slowing. I think Neil Duddo is more embarrassing. Hey, the underlying weakness, I think Claudia Slam is there as well. The underlying weakness is probably the more pronounced aspect of the labor market that the recent trends have been weakening, and those recent trends argue
for the FED to step up here. And whether it's twenty five or fifty basis points, the market right now, as our Bloomberg News is reporting, is pricing in a fifty basis point rate cut.
In September, Paulo out on YouTube, we are listening to witty, smart not young people.
Okay this morning. We're not young, all right, except.
At least is young.
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