Daybreak Weekend: AI's Job Impact, NATO Summit, China Eyes New Eco Data

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1:55This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our Daybreak anchors all around the world. Straight ahead on the program, a look at the impact of artificial intelligence on the labor force. I'm Nathan Hager in Washington. I'm Caroline Hepker here in London, where we're looking ahead to a key NATO summit in Turkey. Nathan. I'm Doug Krisner, looking at whether price pressures in China's economy are sustainable. That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C., Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on BloombergRadio.com and the Bloomberg Business App.

2:46Good day to you. I'm Nathan Hager. We begin today's program with a look at the impact of artificial intelligence in the U.S. labor force. And it's still early days in the debate over how much this rapidly developing technology will disrupt the job market. But we are starting to see the impact in the economic data. Bloomberg's Maya Prakash has been following this and is here with me now. So great to speak with you, Maya, on the Daybreak Weekend program. So where are we seeing AI show up in the data? Well, we're starting to see the effects in finance and information, which continue to be a drag of around 25 ,000 jobs on total hiring growth in the U.S.

3:26The financial activities sector is a concerning weak spot. It's still down around 82 ,000 jobs over the last six months, while information posted another weak month as well at 68 ,000 jobs, decline over six months. This month's jobs report showed a weaker labor market for a variety of reasons, including a downturn in leisure and hospitality. But the underlying story in finance and tech remains unchanged, which is that there are two sectors that will be particularly affected by AI because of their workforce composition and the nature of their tasks. Yeah, it's really interesting to hear this start to show up when we've heard from so many bank CEOs talking about using artificial intelligence to sort of get rid of some of those as they, well, at least one CEO put it, lower level human capital.

4:18So is this the start of a trend? Can we say that at this point? You could say that. I think you can say this particularly in the finance sector, which is about three times of the information sector and a workforce that comprises a lot of low paid and routine administrative work. We found that around 25 % of roles in financial activities are administrative ones, customer service representatives, insurance claims processors, loans processing, and that sort of thing. These are exactly the kinds of jobs that the BLS expects AI to automate first. So we're expecting a broader trend line over the years.

4:57And does this sort of feed into what we saw in the latest non-farm payrolls report in terms of the downward revisions to the prior months? Is that what's showing up in financials and IT as well? Absolutely. So the revision story was more in other sectors, especially in leisure and hospitality. Our financial activities and information chart didn't change much. the revisions weren't a particularly large factor in the underlying trend of job losses. So what's the trend line? Can we talk about a trend line at this point about where AI disruption could go from here? Yeah, absolutely. Well, there's a real question, right?

5:38And we have to sort of break it down by sector. In the information sector, you have jobs like software engineers and computer programmers that make up around 15 % of employment. And are on the higher paid side at around$160 ,000 annually. These are jobs that might actually be augmented by AI. While you might have sort of lower level layoffs, it remains a little bit unclear and difficult to measure whether these kinds of roles will be augmented and made more valuable and more productive because of advancements in AI, or whether they'll be automated away. Where we actually are expecting to see a larger trend is in these sort of administrative and office roles.

6:26Insurance within the financial activities category posted a large decline in May. We're expecting sort of more lower level and administrative jobs in the financial activities sector to see a decline. And then, of course, in entry level jobs as well. One of the big promises of artificial intelligence from the technologies boosters is that for all the jobs that might be disrupted by the technology, there are going to be new ones to take their places. Are we starting to see that in the data at this point, or is it still too early yet? It's a little early to tell. And one thing I would also add is that in terms of these overall headcount reductions, it's also hard to tell whether the headcount reductions are a result of jobs themselves being automated or a result of sort of a reallocation of resources.

7:15What I mean by that is, you know, companies invest across finance and technology, investing in AI and making CapEx investments at huge rates, and so having to cut labor costs as a result. That's not necessarily the same thing as these jobs being automated away. So I think that there's an important distinction to be made there. And then in terms of, you know, new job creations, the best place to see that is ongoing gains in non-residential construction. Other data out this week showed construction spending on data centers continues to be strong. In the information sector, you might see a variety of AI adjacent roles start to pop up.

7:57But overall, it's still a little early to tell. And, you know, technology and models are changing so fast that really the trend line could change quite significantly. All right. So we've been talking about the disruption to particularly financial services and IT. What other sectors are you looking for going forward for potential vulnerabilities? We're seeing a little bit of decline in professional and business services, particularly in subcategories like accounting, consulting and advertising. We saw strength this month in professional and business services, but economists say that this is primarily due to an increase in temp hiring rather than an overall increase in demand for labor.

8:40So these sorts of automatable white collar jobs in these various subcategories are a potential next week spot. Okay. Well, thank you for this, Maya. Great having you on with us. That is Bloomberg's Maya Prakash, part of our economic team in Washington, D.C. Let's take a look now at some stocks on the move in the week ahead. I'm Nathan Hager, joined by Bloomberg News cross-asset reporter Avalon Purnell. I think we all know where we're going to start this conversation, Avalon. The countdown is on for SpaceX to join the NASDAQ 100. What can we expect? You're absolutely correct. SpaceX is slated to join NASDAQ 100 index on Tuesday.

9:22And that inclusion will trigger some mandatory buying for all funds that track this key index. Notably, the QQQ ETF, which is a very popular passive investment vehicle for retail investors especially, will also have to buy in. And as a$2 trillion company, SpaceX will rank among one of the largest on the NASDAQ. Historically speaking, though, seasoning rules have delayed IPO entry into these major benchmarks for at least a couple of months. As we know, SpaceX just launched, so it's very much been fast-tracked out of that, given the fact that it is such a big company. And it also had a record-breaking IPO that raised$86 billion.

10:01However, worth noting that while NASDAQ did fast-track SpaceX's entry, their rival, S &P Dow Jones, said it's still going to keep their existing eligibility requirements. requirements. Right. So I like what you did there with saying that SpaceX just launched. I mean, the stock itself has kind of acted like one of Elon Musk's rockets, a big up after the IPO, settling kind of back down since then. Do you see this stock kind of settling at a level anytime soon, or are we expecting even more volatility? Well, we can't predict that. However, what I do find really interesting is that along with the entry, we're also expecting the quiet period for those IPO underwriters to also end next week.

10:45So investors will be able to expect to get analysis from banks like Goldman Sachs, Morgan Stanley, and JPMorgan Citi as well as they initiate coverage of the company. So it will be really interesting to see how their price targets and analysis of the company stacks up as well. Absolutely. Yeah, lots more to come when it comes to SpaceX. And hard to believe, but we're already starting to think about second quarter earnings season as well. We're going to start to hear from the first few companies before the big banks open their books, including PepsiCo on Thursday. Going to get a pretty decent look at the consumer from this one, I guess.

11:21Absolutely. As you mentioned, PepsiCo has been facing a very challenging season this year. Those shares not even up a 1 % year to date. However, shoppers remain very cautious about their spending, and also GLP-1s are pushing some consumers to seek out healthier options, which, if you know some of the brands that Pepsi is the parent company of, like Cheetos, Doritos, and Gatorade, it may be sometimes hard to come by. That being said, Barclays is writing that Pepsi's shares have underperformed other staple stocks in recent months, as investors remain very skeptical about how exactly the durability of their turnaround in North America is.

11:58And also worth noting that looking at options data at the moment, It's currently implying about a 3 % move after those results. Okay, so not a whole lot of a move one way or the other. But I mean, it's not just changing tastes to think about with PepsiCo. They've been affected as well by some of the commodity moves around the war in the Middle East as well. Aluminum prices you got to think about as well. How can we see that start to play in some of the results here? That's a really great point as well. Bloomberg Intelligence had a really great note out talking about how the company's growth plan and also their full-year outlook are going to be really in play in a significant focus on the call, especially for that cost inflation piece.

12:35As we already said, the consumers are very much stretched at this moment. And for companies like PepsiCo, that is kind of problematic. So it will be very interesting to see how exactly they're also planning to handle these uncertain times, to say the least, with the Iran war and other factors. And not to be outdone, on Friday, we're going to get earnings from Delta Airlines and an update, I would guess, on how travel demand is holding up. Not just after all the geopolitics, but I mean, we're right in the heart of summer travel season here, Avalon. Yes, hopefully you have some travel planned. Delta definitely, as you can expect, will be very interesting to see exactly what they're going to be saying about those fuel costs.

13:21And also their full year guidance will be top of mind for everyone going into that print. Options data already showing that they're beginning to price a potential move of about 5.8 percent. So definitely investors will be very excited to see what exactly is happening at Delta. TD Cowan expecting a company to report very strong demand across all products and geographies. They also note that a recent drop in fuel prices paired with strong peak season pricing from the summer travel should enable the company to produce margins that beat expectations, especially into the third quarter, which I know we're on the second quarter right now, but people are also looking into the future as well.

13:56And also worth noting that at least for these analysts, they've actually already boosted their price target on Delta ahead of the print to$106 from$92. Amazing, considering when you look at a chart for Delta Airlines, I mean, it's been on a pretty steady trajectory upward so far this year. I mean, it sounds like analysts expect that to continue, even with some of the headwinds we've seen for travel so far this year. Yes, although I must say that definitely analysts are a bit mixed. Even Bloomberg Intelligence had a great note out saying that Delta's EBITDA and margins will likely be significantly lower as the spike in fuel prices continues to eat into profits.

14:34So while you do have some people who are slightly more bullish like TD Cowan, there are definitely others who are slightly more cautious about what exactly the future looks like for airlines, especially like Delta. All right. Bloomberg cross-asset reporter Avalon Purnell. Lots of stocks to keep an eye on as we head into a new week here. Avalon, thank you for this. And coming up on Bloomberg Daybreak Weekend, we'll look ahead to a key NATO summit happening in Turkey this week. I'm Nathan Hager, and this is Bloomberg. This is Tony Ayo from The Real Report with Tony Ayo and Uncle Murda. You ever notice how everything keeps going up?

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17:13Visit Bahamar.com today and discover a vacation destination where memories are made for a lifetime. Bahamar, life spectacular. This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Nathan Hager in Washington. Up later in the program, we'll look to some key inflation data coming out this week in China. But first, NATO's 32 member states meet in Ankara, Turkey on July 7th and 8th. NATO Secretary General Mark Rutte has been pressing allies to commit to higher defense spending, with President Trump pushing for 5 % of GDP as a benchmark. For more, let's get to Bloomberg Daybreak Europe anchor Caroline Hepker in London.

17:56Nathan, President Trump is expected to gather with other NATO leaders and also representatives from Ukraine, Japan, South Korea, Australia and New Zealand. European allies are racing to demonstrate credibility on spending and beef up capacity, as the US has proved increasingly erratic, threatening to draw down troops from Germany, which has the second largest US deployment outside of Japan. Former NATO Secretary General Jens Stoltenberg said in early June that US European tensions within the alliance are more difficult to manage now than when he left in 2024, adding that the situation has moved in an even worse direction.

18:40This is the UK and others are shifting towards drone technology, AI enabled capabilities and autonomous platforms. Now the International Monetary Fund warned though in April that the global defence spending surge risks widening fiscal deficits over the medium term, as most outlays are being financed through higher borrowing. The NATO Secretary General Mark Rutter, the current one, met with President Trump in the Oval Office ahead of this NATO summit. Here he is speaking to Bloomberg's Joe Matthew and Kayleigh Lyons. The United States has to take care of multiple theatres, not only Europe, also, for example, the Indo-Pacific.

19:25And if a situation would occur where they have to defend both sides of the equation, both the Indo-Pacific and Europe, they have to avoid the situation in which they have spread their resources too thinly. This is why Europeans have to step up. This is NATO 3.0, a stronger Europe and a stronger NATO. That means that the U.S. will stay involved when it comes to the nuclear umbrella, but also when it comes to the conventional. But over time, what you now will see, and this is a structured process, is that the Europeans are taking over more and more of that leadership role. For example, when it comes to the three combatant commands, they will, over the next 18 to 24 months, move from American generals and admirals to European generals and admirals.

20:13So that's also an example of Europeans stepping up, but also when it comes to Ukraine. The fact that the US is still providing all the support, but paid for by Europeans and Canada, which is only fair. So Europe stepping up, the US staying heavily involved when it comes to the Convention on Nuclear Deterrence in Europe. So that was NATO's Mark Rutter speaking to Bloomberg there. Well, joining us now to discuss the upcoming summit are Bloomberg's EU defence and foreign policy reporter André Palaciano and Bloomberg's European government editor Rich Bravo. Welcome to both of you. Thanks for speaking to me.

20:49Rich, how fraught is the relationship between NATO's European members and the United States right now? It's really hard to overstate how delicate this relationship is between Europe and the European allies and NATO and the US. I mean, currently you have a very contentious trade relationship, which is undergoing certain negotiations. The EU eventually agreed to accept a very – what they think is an unfair trade agreement in which they're paying 15 – or there is a 15 percent levy on all European exports to the U.S. and Europe has removed all tariffs on U.S. products. So the underlying theme here is that when they approach NATO and they approach defense issues, they approach this understanding that every issue with Trump is related.

21:49Trade, defense, security, geopolitics, everything is in the same bag. So when you look at a deteriorating relationship with the U.S., you can't just look at the defense angle or the trade angle because all of these things are related. And when the U.S. becomes unhappy about the trade situation, then Trump will bring up the threat of removing security for the continent. So things have gotten really contentious and fraught with the European allies and NATO. Yeah, so it's all interlaced, intertwined. And President Trump will be there in person. So you have to add on to that that sometimes things can pivot on a social media post.

22:38Andrea, how quickly is the United States withdrawing troops from Europe? How do the Europeans see this? Well, it's very much an ongoing unfolding process. There has been indeed the social media post announcement, as you just mentioned, that the US would be withdrawing 5000 troops from from Europe. That hasn't happened yet. It is expected to happen soon, but it hasn't happened yet. However, that was kind of the tip of the iceberg, really, when we think about the U.S. disengaging from the European continent. That was the one social media, very visible announcement that Trump made. But what's much more serious is that the U.S.

23:23has reviewed its so-called NATO force model. What does that mean? It's the assets in the troops that the U.S. would send to Europe if there was a war or a major crisis in Europe. And that has been slashed massively. And because these troops are not technically in Europe yet, but they would be deployed, these changes are effective immediately, basically. So if there is a war in Europe tomorrow, these changes would already apply. And on top of that, when Hexeth came to Brussels a few days ago, he also delivered another shocker to allies in the name of a six month force posture review. So, which means that in the next six months, the U.S.

24:11will be looking at all of its forces, all of its assets that are currently in Europe and will be deciding whether they're all necessary there. And there we can expect the really serious drawdowns to happen from the assets currently in Europe. Yeah. And so you can sort of feel the tectonic plates, can't you, shifting? I mean, the E5 countries, so these are the most important, perhaps European countries, they met ahead of the NATO summit, Andrea, and they have said that they're trying to make NATO more European. What has changed in terms of defence spending? You just heard earlier from Mark Rutter, who was there with the kind of gold embossed bar charts in the White House and this idea of pledging an increasing defence spending in Europe.

24:59What is moving? How are we thinking about this? So indeed, Mark Rote went to the White House, showcased big numbers, praised Alice for spending so much more. And indeed, it is true, countries in Europe have been spending a lot more than they were a few years ago. But as these things go, some of the countries of NATO took this more seriously than others. So we have countries like Germany who have really been doling out the billion dollar contracts, procuring, buying weapons and really ramping up. Others haven't really done so. We have a number of countries that are still hovering about around 2%, which used to be the previous target and don't seem to be on a path, on a credible path to reach these 3.5 plus 1.5 for defense related spending.

25:54So five in total anytime soon. So, yes, across the alliance, it's not very consistent. But also there is a real difference between pledging money, announcing spending, announcing contracts and having those actual capabilities. And so because, as we were saying, a lot of the U.S. pivot is effective immediately. And also we have been giving the six months timeline for the U.S. Forest Posture Review. We are talking about timelines that Europe simply cannot match. So this is exactly the scenario, the nightmare scenario for Europe, basically, that the U.S. will withdraw too quickly without giving them the time to actually ramp up and have the actual weapons and men to replace them.

26:44In terms of the threat assessment, though, now, how do we think about the biggest threats to Europe? What do we think about the Russian threat to Europe? Is that still the main one, Rich? Well, that's obviously a massive concern in Europe, particularly in the Baltic states. But obviously, Russia's war in Ukraine has depleted its economy and military quite significantly. So the concerns about a near-term threat are not very high, but we've also seen an increase in drone incursions and an increase in hybrid attacks, which show that Moscow is testing NATO's waters and they want to see what NATO's reaction is to these incursions.

27:33Okay, theoretical. Well, let's think about the next few days then. Do you think there's going to be a sting in the tail over Iran? Trump, Hegseth, Rubio have all been critical about the lack of European support for this U.S. war. Yes, you've hit on a very good point. The role that Europe has played, well, more specifically, the role that Europe has not played in the Iran war has really upset Trump and Hegseth and the American administration. Obviously, Italy and Spain did not allow the U.S. to use certain of its bases under certain circumstances. And this is something that Trump has returned to repeatedly.

28:20they're not happy with the fact that Germany's merits and other European leaders, particularly Pedro Sanchez in Spain, have been critical of the war the Pope was critical and Trump got into a social media battle of sorts with Prime Minister Maloney over those comments But this is a big issue between Europe and the U.S., and Europe has been trying more recently to sort of paper over those and give as much support as they can. So you saw France and the U.K. launch a joint expeditionary mission that would clear mines in the Strait of Hormuz once fighting had ended. This is, again, all on paper, and whether it ever comes to pass remains to be seen.