Stocks Jump after October Jobs Report

and presumably they are spending more. That is good for the retail business and deep global payments business. To give us a sense of how that's playing out in the retail space, we welcome Jeff Sloan, CEO of Global Payments. Jeff, thanks so much for joining us here on our Bloomberg Interactive Brooker Studio. So again, we had a really strong job numbers today. I would think for your business, which traffics in the payments business, that's got to be good

backdrop for your business. Absolutely it is. We actually reported very good third quarter numbers yesterday with revenues up, margin up eight basis points, earnings up eighteen percent year over year. That follow down the heels of Massacre and Visa essentially reporting the same thing. So we already saw a very good same store sales left here in the United States, about three and a half percent same store sales growth in the third quarter for US, which is towards the

high end. I think our record was about four, so right near the high end high end of that. And I think our numbers, as well as the unemployment numbers, mimic that. So I was looking at some of the earnings and some of your comments afterwards, in particular as it related to new partnerships with City Group and the Canadian Cooperative as Jarden's Group, and I'm wondering you said that the City relationship in particular is the first of many that I foresee us doing among money center banks.

Can you talk a little bit about that relationship and which banks you're you're looking to partner with. So one of the fastest growing things in our business is what we call omni channel you speak called e commerce. Now there's really no difference, which means you can buy something from Lulu Lemon, for example, on your phone saying at a pool of Christmas, pay with your face and your thumb, have a delivered to your house. You don't like the size,

you go return, you order another one. So that kind of friction less commerce for the consumer and ease of use is where the market is going. This partnership with City partners us with one of the largest money center banks in the world to provide those kinds of services to multinational corporates cross border and both the physical and virtual world, to allow their customers, their multinational customers to provide those services to their consumers on a seamless basis.

So the reason I said I think we'll see more of those is that's where the world is going. That's where the trend is. Zero friction for consumer commerce, and even the most the largest, most complicated fis in the world, like City, I think, have come to the realization that they can't do it on their own, that they need a payments technology partner, and we're pleased to be that partner for City. So I know you've recently closed a big acquisition pieces twenty one billion dollars. Tell us about

that deal and what's the strategy behind that deal. So in our business, it's really all about scale. So processing the next transaction should be cheaper than the last transaction. The transaction after that even less expensive than the current one. So our partnership with Tiesis takes our scale to fifty billion plus transactions a year. It doubles the size of the company to about fifty billion dollars stay a little bit over that uh in market cap. It extends our

geographic presence from sixty countries today to a hundred. A hundred countries is part of Tisis, and it gives us the largest e commerce and omni channel business in the world that a billion of revenue, the largest owned software business in the world, that a billion of revenue in payments um, and the largest integrated partnered software business the world also a billion dollars in payments. So we couldn't be more excited about our partnership with Teessis and where

it's taking that company. I think you saw that reflected and yesterday's trading and our outlook for the rest of nineteen and twenty. So when you came in this morning, I said, you know, thank you for being here. You said, I'm excited to be here, and I don't doubt it. I'm looking right now at your share price. It is up. The total return on your shares are up. At sixty six percent year to date, up more than one percent today, two point two percent yesterday. Go through the days it's green.

I'm trying to figure out who you're biggest competitor is and what it will take to sustain this kind of growth. Sure, well, it varies by geography, because our business is really geographic centric. I think we have the far, by far the broadest breath geographically multinationally of anybody. But here in the United States of Fidelity Post Information Systems POST our purchase of

World Pay five serve Post their purchase first data. Some of the domestic banks here in the United States JP Morgan, who I think does a fantastic job and what they do Bank of America which announced recently that they were recreating their own payments business away from one of our competitors. Those are our partners, but those are also our competitors. And then outside the United States, it really varies by geography. So in the UK, for example, Barclay's Royal Bank of

Scotland both have big payment businesses are partner. There is HSBC in the United Kingdom, so seemed to be a lot of M and A in your business. Give us a sense of how your business, your industry structure right now, do you think you're gonna see more M and A and beyond and specifically for your company, do you feel like you have the scale that you need? The answer I think is absolutely to all those things. So the first thing I'd say is it's always been in consolidating business.

Anytime you're in a scale economics business, more scale is better, less scale is worse. So that's what tends to drive the transactions number one. Number two I would say is we're not done yet at Global Payments. Our balance sheet is in a very healthy position. We're only about two and a half times levered today as we announced yesterday coming out of the deal, so firmly investment grade. Once we have our sea legs under us, call it the

spring of twenty. As a managerial matter, In terms of the integration with Tjesis, I think we feel very good about re engaging on the murger side. Uh And certainly our door is open today for additional transactions. There's no reason we can't double yet again as we did post the murder with Heartland about four years ago. Just real quick here, I'm wondering what the barrier of entry is for some of these big financial institutions to create their

own payments system rather than partnering with you. Well, I think you saw yesterday in the context of Desjardin in Canada and to here in the United States, even the largest, most complicated financial institutions in the world need the right access to market leading technology. And what it's all about is technology UM and related software in the in the payments business that couple with distribution. Distinctive distribution or sales

is really what we sell. So the largest guys out there have concluded they don't yet have the scale or the time UM to get to market the way we

are from a technology point of view. So there are there are great barriers in what we do now everyone takes payments today, So I'm not suggesting that going to the dry cleaner um that there's a lot of barriers necessarily for all the small merchants, But in what we do, which is distinctive, which is what city in de Jardin h noted yesterday, than certainly I think those things are do with high barriers. Jeff Sloan, thank you so much

for paying with us and for correcting my pronunciation. Pronunciation of de Jardine, which I absolutely butcher Jeff Sloan, chief executive Officer of Global Payments, joining us here in our Bloomberg Interactive Brokers Studios. Well, you gotta like the numbers out today, much better than expected jobs numbers, suggesting that the consumer remains very very strong. Indeed, and that kind of devetails with what we heard from the Federal Reserve yesterday.

Let's get a sense of kind of where this all plays out, of how this all plays out with Steven Blitz, chief US economist at T. S. Lombard. He joins us here in our Bloomberg Interactive Broker Studios. So, Steven, thanks so much for joining us. Let's first just get your thoughts on kind of what you took away from the jobs number today. Well, I think in terms of the Fed's perspective that the economy is in a good place

is certainly underscores their point of view. I think you can still look through and see the same problems, which is that the economy just continues to create these low wage service sector uh jobs like in hospitals and healthcare and restaurants, which really doesn't move the needle very much in terms of earning. So and then when you look at average real averagereally earnings are nominal versus where the unemployment rate is. This the disconnect that the FED is

really trying to push. Why they can't seem to get a higher wage growth for the given very low level of unemployment. There's also a disconnect when it comes to the manufacturing sector and when it comes to consumers. There's consumer strength manufacturing weakness. We saw that today. Yet again, the sectors where there were job gains were the more service sectors UH and manufacturing took a hit. We saw that with the I s M number coming in weaker

than expected, a recession in that particular sector. How long can these two industries totally diverge before one pulls the other in a in a direction. Well, if one's gonna pull any in any which way direction, it's gonna be manufacturing will pull the service sector. Um. But the when you get back to the employment number itself, remember that that decline in manufacturing is the most part the general motors and the strike. So that so that forty thousand

is gonna come back next month. The job So that's why I'm focused on service sector, not even thinking about the good side of the employment numbers today, because we know that's gonna flip back some way, shape or form. Now to your other point, manufacturing matters, Okay, it is still the largest single industry in the United States in terms of its real value add to real GDP, it's around four now. The service sector as a whole is larger than manufacturing. But the service sectors made up a

lot of different industries. The one we're sitting in right now, the one I work in healthcare. I mean, there's a lot of different restaurants. There's a lot of different industries there that have different sensitivities to the business cycle. So the spending thrown off by manufacturing does matter now going forward, which is really what we're thinking about the FEDS actions, in particular what it did on the balance sheet and finally getting the funds right below the two year and

today the markets realizing maybe the Fed's not wrong. So we're seeing a re steepening of the curve again. The low funding rates, the steepening of the curve, a little bit of a weaker dollar should aid manufacturing going forward, to should aid the emerging markets, and that also should in turn aid manufacturing as well as export exporters in

the United States. So, um, when you look at that in terms of the good place, that's a forward dynamic that's positive as opposed to the one that's weighed on manufacturing looking backward. Are you of the opinion, based upon what you heard yesterday from Chairman Pal that there's one more rate cutting and that might not not even come to maybe mid next year. Yeah, I don't think there's any more rate cuts coming. I think I think he told you there has to be a material change in

their view. So that means that uh, and and then and the risk and danger in that, okay, is that what we're obviously we're thinking about cuts instead of increases. Right, So the material change change and the risk in that phrase is that, oh, employment now is falling, which means by definition, they're going to be too late to cut. So this year you could argue they were preemptive. In fact, that's how I characterized it last December, that they would

be preemptive this year and they were. Now it's less a chance of than being quote unquote preemptive because they didn't want a material change, and that's really the risk in terms of their phrasing, what's a chance of procession in the next twelve months. I think you have to put it in fifty fifty. WHOA, that's much higher than the consensus. Well, okay, that doesn't bother me. You know, It's just that you're you're you're dancing so close to

the edge here, right, you have weak manufacturing. How how can we say that we're danding close to the edge? We're talking about how great the employment number is, the strength that you're seeing in services, and we're close to

the edge. Well, we're close to the edge because the economy is only growing around one and a half two percent, so it's growing below trend, right, And let's face it, the multiple in the equity market is reflecting not just earnings or anying expectations, but the liquidity that the FED

is putting into the system. And so the risk is that there's some unforeseen accident, which is obviously you know, I'm all accidents are unforeseen, right, But it's an unforeseen accident that hits the equity market that the FED can't get the equity market to bounce back up. Consumers, households are overinvested in equities. It's a whole long story, which I know we don't have time for here. But because of that, that will feed directly into consumption, directly into

slowing the economy. And that's that's the risk. So we need a period of six to twelve months of earnings, of the earnings supporting the multiples in the equity market more so than the FED, and then things are on a more solid ground than that. Fifty fifty drops way back down on the number. Today we had wage growth of three. That seems to be the range that this

economy is in. And is that is that just as because of the types of jobs that are being added you mentioned earlier, kind of you know, service jobs, whether it's healthcare, fast food. Is that just kind of it

for this economy? Uh? It is for now? Sure, I think that the idea was that at some point here and then all this trade stuff between the US and China put the kabash on it, is that at some point here you need to get a growth in capital spending a right, So we we have an old cycle in terms of age, but not in terms of the cycle itself, right in terms of having that leverage spending

to build capital. Once that gets going, wage growth will accelerate because you'll begin to increase employment in what are traditionally higher wage jobs. But at the moment, this is what the economy is going to deliver. Look of the odd thousands of service sector jobs that were created, fifty thousand, I'm just talking top of my head around numbers. Fifty thousand was healthcare and in restaurants. So that's not going to move the needle on on wage growth. Steven Blitz,

thank you so much for being with us. Thank you for having me. Stephen Blitz at Chief US Economist at T. S. Lombard, Thank you for for being here in the studios. Lots of economic data day today, better than expected jobs numbers. Uh. The I s M came out with their manufacturing numbers. To get the latest on that, we welcome Tim Fury, chairman of the Manufacturing Business Survey at the Institute for Supply Management. Uh. Tim, thanks so much for joining us.

Give us. What are your key takeaways from this I s M manufacturing data today? Yeah? Thanks Paul. So the report for the month of October was more positive than it was in September. I think although we were selling a contraction mode, the contraction rate has slow and maybe more importantly, the new order number which kind of sets

the drum beat. UH improved pretty substantially from the prior month, up one point eight point still in a minor contraction mode, but with indications in the right direction, supported by the fact that new export orders they go into an expansion mode again, almost a nine actually nine point four point

change from the prior month. So those are the positives on the NAZI positive on demand, our backlog continued to contract at faster rates than it did last month, which is a little bit concerning, and the customer inventory account grew closer to the about right, which is not a positive thing for future output. So but overall the report was much better than September. Still contracting, but we seem to have stabilized, supported by the fact that the new

order number is close to fifty. How much of a lagging number is this? And I see this in the context of the headline that we just got the w t O proving three point six billion dollars in China trade sanctions on the US. That should, all things being equal, slow at some of the exports from the United States. How long would it take for that to get into the data? Yeah, that could impact our new export orders.

The orders come in. They could be for immediate delivery, or they could be for delivery three or four months out. So it's going to depend. Uh, you know that. I don't know that that's a really big number anyway. So you know, I would think that our new expert or at least in the short term here, is going to stay about where it is. I don't know why it would drop unless there's an escalation in the trade issues,

you know. I think the other the other story here is that we had a little bit of a shift in our industry sectors that were contributing to the p m I. There's no surprise that the transtation equipment sector actually contracted faster than had the prior month, primarily because of the you know, the GM strike and you know, we have some uncertainties there on the MAX. But we actually had the chemical industry go into a contraction mode too,

from a moderate expansion in the prior month. And we had the computer electronics industry sector go from a minor contraction in the prior month to an expansion. So we've got some shifting going going on here in our top three industry sectors. The three of those together make up somewhere around manufacturing GDP. I would expect transportation equipment to get better next month because we no longer have to strike U. And I would hope that the chemical industry sector,

where we're bound a bit. There's a lot of factors probably a play there. We have an advantaged cost base, we probably have a disadvantage here on counter tariffs as well as the currency issues. So, Tim, this marks the third consecutive month of the print below fifty. When does this become a trend that might be worsomed to you and your economists? Well, I mean this, this is in no way isn't look at anything like ten years ago.

And the reason is that although we are contracting, you know, the fifty is the number, we're not contracted really strongly. You know, if we were in the low forties, high thirties, and it would be very concerning. But you know, I think you know you're talking. Remember this is month a month. We start every month at a fifty point, So we're slightly off of last month. Uh not heavily off, slightly

off meaning you know, even less than five percent. So and I think now that we've kind of bounced a bit, we went to forty nine point one in August, forty seven point in September, now at forty eight point three. Although we're up a half a point, there's no reason to believe that we can't get back to fifty in the short term. Here, Timothy Fury, thank you so much for being with us. To Furious, chairman of the Manufacturing Business Survey at the I s M. Thanks for listening

to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Paul Sweeney. I'm on Twitter at pt Sweeney and Lisa bram Woyds. I'm on Twitter at Lisa bram Woit's one before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.