Instant Reaction: US Adds 172,000 Jobs, Boosting Bets on Fed Rate Hike by Year-End

0:00Looking for more investing options? Meet SIBO, the exchange that pioneered options trading. With exclusive trading products like VIX and SPX options, SIBO can help you trade in any market environment. There are risks associated with SIBO company products. Review the disclosures and disclaimers at SIBO.com slash US underscore disclaimers. At Oppenheimer, we're proven because we're grounded in discipline. For 145 years, we've been building and protecting wealth through every market cycle. with precision, clarity, and the courage to think boldly beyond the moment. This is what market-tested legacy looks like for this generation and the next.

0:36Put the power of Oppenheimer Thinking to work for you. Wealth Management, Capital Markets, Investment Banking. Ryan Reynolds here from Mint Mobile. I don't know if you knew this, but anyone can get the same premium wireless for$15 a month plan that I've been enjoying. It's not just for celebrities. So do like I did and have one of your assistant's assistants switch you to Mint Mobile today. I'm told it's super easy to do at mintmobile.com slash switch. Upfront payment of$45 for three-month plan equivalent to$15 per month required. Intro rate first three months only, then full price plan options available.

1:12Taxes and fees extra. Default terms at mintmobile.com. Bloomberg Audio Studios. Podcasts. Radio. News. This is a breaking news update from Bloomberg. Instant reaction and analysis from our 3 ,000 journalists and analysts around the world. And the May unemployment report hitting the Bloomberg terminal, and it shows a big jump in the number of jobs added to this economy in the month of May. We added 172 ,000 jobs. This is blowing away estimates of 88 ,000. Even the whisper number, which was for 99 ,000. And this is compared to the 115 ,000 jobs we added in the prior month. Going through this report, we've got the unemployment rate holding steady at 4.3%.

2:01That was expected. As for average hourly earnings, not much movement there at all, up 3.4%, right in line with estimates. And a bit lower than the month prior when we saw that move up 3.6%. So again, wage is not keeping pace with inflation, which is now at 3.8%. And we have got, also want to take a look at the labor force participation rate, again, in line with estimates at 61.8 percent. So unchanged from the prior month. But again, the headline number here, the economy adding many more jobs than expected, 172 ,000 in the month of May. The estimate was for 88 ,000. The unemployment rate holding steady at 4.3 percent.

2:41And that's a look at the May jobs report. Tom and Paul. Alexis, thanks so much. Bloomberg surveillance on this jobs day across this nation. Brought to you by IBKR for the past three years. Interactive brokers, individual clients, average 24.3 % annually, beating the standard in poor's 500. Lower costs and access to 170 plus global markets. It matters. Visit IBKR.com slash performance. So, Paul, I go to the yield space. You got to off this. Yep. It's a jump condition, five basis points, 4.52 on the 10-year, 5.01 on a 30-year bond, based on what Priya Misra said X number of minutes ago, like you're one-third of the way to her tension.

3:27Exactly right. And on the short end, Tom, which kind of reflects where maybe the Fed's thinking about, up six basis points on the two-year Treasury, 4.1%, and futures S &P off 45, Tom. Claudia, I'm with us here for a few minutes of perspective. Claudia, I get the idea that non-farm payrolls are tough to call, but I got a 93 ,000 plus two-month payroll revision. And what really pauses me is even the underemployment rate came down from 8.2 to 8.1 percent. How does a chairman respond to this when he's cutting the curtains for the new office? Right. Well, I mean, you know, it's good news on adding jobs.

4:15I think one for the Fed, this isn't such a worrisome print in that wage growth was still pretty moderate. We're still seeing slowing in wage growth. So, you know, the Fed is not anti-jobs. They're anti-inflation, right? So, you know, if you're not seeing those cost pressures push in, you know, this can be these are still pretty modest numbers in terms of adding payrolls. They're much better than what we saw last year. But so I think this is this looks like solid report. Unemployment stays low. Like you said, underemployment ticks down a bit and wage growth is still slowing. So, you know, in terms of this, you know, being some inflationary pressure, I just don't see it here.

4:54Unfair here with, you know, two minutes into this to parse it and all. but I got a three-month moving average of nonfarm payrolls, folks, from another time and place, 188 ,000. Do you assume, Dr. Sam, that this will be revised down in six months or 12 months? No, and I don't think we should. Even though we've seen in the last few years our annual revisions have been pretty substantial, down revisions, there's research coming out of Cleveland Fed that says these aren't anomalies. We haven't broken the model in terms of these surveys always being prone towards down revision. And actually, we've gotten some indication from administrative data that we might actually get an upward revision for last year when that comes in in the spring.

5:41So I think we can take these numbers for what they are. And in particular, if you look past three months, averaging up around 100 ,000, we saw some upward revisions. I mean, this really does look, if nothing else, really puts the exclamation point on a stabilization in the labor market relative to last year. Paul, can I do a shout out to our collective set of guests? Yeah. And that they have been talking for two or three weeks the directional tone of this report. Yep. The labor market. Pretty solid there. So, Claudia, you called out wages, 3.4 percent kind of annualized growth. But then I look at next Wednesday, we're going to get a CPI print.

6:19And consensus there is for like 4.2 percent growth in CPI. So wages are not keeping up with inflation. What's the thought there? So wages are not keeping up with inflation. That's going to limit the purchasing power. I mean, when I talk about this not having the inflationary risk is often if it might be concerned about kind of second round effects, workers bargaining up their wages to try and cover those prices. And that creates another round of inflation like that's you know, that's not what we're seeing in this data. And what we're really concerned about is, you know, does this inflation have legs of its own?

6:53Does it really start to kind of feed on itself? And that's not the sign here from this data. Of course, the flip side of that is this is, you know, puts a hardship, puts the screws on workers that are seeing their paychecks be eaten up. And it limits the ability of businesses to pass on some of these costs. So, yeah, it limits inflation. But, like, there's kind of pain being fed into the system. It's going to go somewhere. The negative real wage is going to be the heart of the matter. Claudia, we got to go. Sean emails in, says, Claudia, thank you so much for mentioning Granville, Ohio. Sean went to Denison, played lacrosse.

7:26Go Big Red. Sean, thank you so much. Go Big Red. Claudia, thank you so much. Claudia Somm, our definitive market economist across this nation. All of her work at the Fed, at Michigan, at New Century Advisors as well. In the studio right now with equity perspective on this, summing in the total market, working with Lizanne Saunders, is Kevin Gordon here. What's a chart you put together this morning? I want to get out front of the Kevin Gordon tweet. What's on your mind? Well, for the equity market, what's been on our mind, and this was sort of central to the equity component of our mid-year outlook that we just published, is this divergence that you're seeing in breadth.

8:04The fact that, you know, the average stock, when you look at the percentage of companies above their 200-day moving average, when you look at percentage of companies outperforming the S &P 500 on a rolling three-month basis, that's remained pretty weak because you've gone through another kind of bout of AI hype, especially within the semiconductors. So that in and of itself is not a horrible omen for the market. We've seen it actually resolve itself. Those divergences resolve themselves in a positive way over the past couple of years when they have happened. Yeah, even in the past three days. I mean, when I got the Dow moving up and I see some of the mutual funds giving me better returns than Broadcom, there's something going on out there, Yeah, and I will say the new norm, you know, the last time that you actually saw a lower percentage of that metric I mentioned, the percentage of companies that are outperforming the index on a rolling three-month basis, the last time you saw a lower percentage, so sub-23%, was 23 and 24.

8:57Before that, you have to go back to 1973. So, of course, very different market backdrop, 73, the start of a horrible bear market, 23 and 24, more consistent with correction. So it is more of the norm these days, you know, given the concentrated market. Paul, I should say futures are negative 50 right now. Kevin, we're in a time here where very active equity new issuance in the marketplace. We had this monster mega deal from Google this week from Alphabet. The market took it in seemingly very well. And then, of course, we've got all these IPOs that are toot up. SpaceX on the road as we speak. Then maybe some of these AI plays come in.

9:33Huge transactions. What does that tell you about this market here? How do you guys think about it? So I think it does underscore, of course, that the sentiment environment is certainly getting frothier. You know, whether you think of it as frothy or not, I think that's always just kind of up for, you know, whoever's whatever the person's perspective is. I will say, you know, I've been traveling the past four weeks almost nonstop all over the country, also in Korea. But, you know, in the U.S., when I've been speaking with our investors, there's actually been a sort of a elevated degree of skittishness or hesitation around just the environment of mega cap IPOs in general.

10:06So the attitudinal sentiment is not necessarily matching up with the behavioral sentiment that we've been seeing in terms of really stretched fund flows and how much has been going into tech and how well semis have been doing. So to me, that sort of lays the framework, I think, or the groundwork for maybe a little bit more room for sentiment to get stretched to the upside. Of course, I think the game will change a little bit after we do get a lot of these companies coming online into public markets. But I haven't yet felt at least that on the attitudinal side, there's been a lot of that hype that has matched what we've been seeing with people, you know, what they've been doing with their actual dollars.

10:40And I guess, you know, if you want to take the bullish side here, which is probably the right way to be, earnings have been there. Earnings have supported this market, it seems like. And how do you think about that going forward? I mean, I think, you know, of course, the breadth of earnings is actually if you just want to look at the number of industries that are seeing their earnings grow. Yes, the breadth is there. Of course, the magnitude in terms of concentration, it is a little bit more skewed towards the large caps and the mega caps. I do take the optimistic side and angle of that, where if you look over the past several decades, the growth in that earning share for that cohort has grown.

11:15So it's not like it's been totally unjustified. But on the flip side, you do have more reliance on a smaller share of companies. So to the extent that they can't keep up with expectations, to the extent there is a disappointing quarter, a series of quarters where CapEx estimates for some reason have to come down, earnings estimates get revised lower, of course you always run the risk. But that's why we make the case for diversification within the equity market, because you've been able to, you know, that's been the best way to play this, especially with even a sector like health care over the past couple of weeks.

11:44On the road, and with the new Schwab commitment to wealth advisors and all that, huge announcements from Schwab over the last 10 days on this. On the road, in the trenches. Paul and I, it's cushy. You know, Paul gets in the Gulf Stream, and he goes out to San Francisco, and, you know, he takes the ferry home and sits there with a beverage of his choice. It's a can of Budweiser. And, you know, I'm in the Bentley going up Madison Avenue complaining about the traffic. You're in the real world. Yeah. How do you respond to people who raise their hand and say, I love all your optimism. We love Lizanne Saunders, but we're scared stiff.

12:24How do you respond to them? Well, frankly, you know, we don't get a lot of clients who exhibit a lot of fear, especially if they're working with an advisor and taking an advised approach. I mean, you know, I've always been a believer that is the benefit of working with somebody, taking your own personal emotion out of it. But seriously, I mean, that is that is actually the biggest split I see, especially when I talk to people who are newer to markets, this kind of newer retail cohort that just is still getting into this, still getting into investing and learning it, not necessarily working with somebody.

12:55That's where you see some skittishness around, what do I do with a big drop in the market? What do I do when I see a particular stock or industry go up by 20 or 30 percent in a day? So I haven't been met with as much fear. But to my point around some of these larger IPOs and just the sentiment environment. That was where there's been some, I guess, concern over whether this is, you know, too hyped up. And I think it comes back to, I mean, my favorite quote ever about markets is from the late great John Templeton, Sir John Templeton, you know, bull markets being born out of pessimism, growing on skepticism, maturing on optimism, dying on euphoria.

13:30I mean, that is, I think, the perfect way to sort of, the perfect overlay that you can apply to really any cycle. It doesn't say anything about earnings, doesn't say anything about valuation. When you're on the road seeing your clients, are they looking to embrace these markets here? Or like as Tom said, maybe a little bit skittish. Are they looking to maybe reposition? Maybe I should own some more bonds. Maybe I should own some gold. Maybe I should maybe a little bit more cash. Yeah, I haven't seen the willingness to embrace markets fade materially. If anything, I think the bigger concern has been more on the economic side.

14:00And actually, the dominant question I've been getting in the first question I've been getting at every event is the concerns over AI in the labor market. That has actually been, and from all age groups across the whole spectrum, from Gen Z to people who have been investing for decades, that has been the dominant question that, of course, nobody knows the answer to. I tend to have a relatively optimistic view in the end, the end game of this, not necessarily being tens of million jobs just fading out of the economy, but that has definitively been the main question. I got to go 73 to 75, negative 45 % on the Dow.

14:38The percentage of people in this country that have not enjoyed that, or Bob Seger at the time, huge amount. Kevin Gordon, thank you so much. Really, really appreciate it. We take huge advantage of the way all of our guests travel, travel. When your options are limited, so are your opportunities. At SIBO, the global exchange

15:26Transcription by CastingWords Flash into savings event from Apple Vacations is here. Now through June 25th, save up to$150 on vacation packages, plus instant savings at select resorts in Mexico, the Caribbean, Central America, and top U.S. destinations. Use promo code JUNE26 for these limited-time offers. Start planning today at AppleVacations.com or contact your travel advisor. Apple Vacations, where your story starts. At Oppenheimer, we're proven because we're grounded in discipline. For 145 years, we've been building and protecting wealth through every market cycle. With precision, clarity, and the courage to think boldly beyond the moment.

16:09This is what market-tested legacy looks like, for this generation and the next. Put the power of Oppenheimer thinking to work for you. Wealth Management, Capital Markets, Investment Banking. The romance of the business, let me tell you, Christina Campmany is out traveling, got to get home. Her children are well-mannered somewhat. But, you know, she's stuck at DFW and can't get home for a six-hour delay. I mean, that's the romance of working for Invesco across this great nation, right? Of course, of course. The travel's brutal. I mean, it's just, you get one delay and three days are ruined. At least we've moved past our TSA expedition at the beginning of the year with all those lines.

16:54I feel like it's a little smoother now. I was very fortunate. My mom missed a flight going back, leaving my house. I don't think she was too happy with me. Thank you for joining us. Christina Kemeny with us, Senior Portfolio Manager at Invesco. Let me ask a Paul Sweeney question. Off of this, I got a yield shift. Price down, yield up. Kevin mentioned Sir John Templeton. Are bonds on sale today? You've definitely seen a bit of a reprice across the front end. And I think, I mean, we keep chopping in these ranges, right? Yeah. In the last month, we thought maybe 450 would contain 10s and 5%, and we pushed to 5, excuse me, 520 and 470.

17:33And then you saw very quickly money get put back to work there. And I think once we've tested those levels, we'll probably repush them. And it does keep changing the narrative, right? Before, we thought it was somewhat balanced. If we've had this energy shock and we have an inflation shock. But we're still a little bit concerned about are there going to be cracks in the labor market when we're talking about payroll break, even maybe zero to 50 K. And you have one hundred and seventy or one hundred and eighty plus positive revisions. Like it's hard to say that there is weakness in the labor market.

18:03But right. Like where does it feed through? Right. You still have a consumer led economy. And I think we I mean, we're all sick of talking about this K shape. But it's so true. Like there I feel like there is pain out there in kind of certainly the bottom half. We get lucky here, folks. When you have Christina Campman in the turret, she can respond. Traders fully price in quarter point Fed rate hike by year end. That changes that changed. Yeah. Yeah. I mean, again, when we had this flip in post the Middle East shock, we flipped from an easing bias pricing to a hiking bias pricing. And I think it's very hard to go back.

18:46I think the market is grappling, whereas other global central banks like we expect the ECB hikes next week. I think it's clear that the BOJ is still going to hike. I think the market is pricing for the Fed to go. We have priced more and we've taken out a little bit of it. And now we're retesting that again with a five, six, seven basis point sell off in the front end. But I don't know that where anyone has high, high conviction that the Fed is certainly going because it's just still this shift. I think even they want they don't want to make the mistakes that they made with the inflation shock post covid.

19:18But they also want to see, like, is it more broad based? Are you going to see wage wage pressures materialize? And we haven't seen that bit yet. What do you think about just the opportunities globally in your credit markets? Where do you see the value these days? Credit or rates or both? Both. Sure. So I think when we look at credit, credit still remains really tight. So it's hard to get really excited. But you look at it and you say there is clearly and I think you guys spoke about it earlier today. There's clearly money going into credit funds more so than rates. And I think that there's that question out there of spreads are so tight.

19:54But like, what's your comfort? with the with there's more government fiscal issues than some of these big hyperscalers and that people are comfortable putting money with. So I think money will continue to go there. So within credit, we probably have a bias for the U.S. over Europe and shorter, higher quality paper and shorter demand paper within global rates markets. I think there is still value in the front end across curse, even in the U.S. Right. Because we're not so convinced that the Fed really goes on a massive hiking cycle because I think the financial markets don't tell you. But there are other places that are interesting, Australia, Canada.

20:31Okay, before we go, I think it's just so important. Is your market functioning normally? I got a SpaceX IPO. Fortunately, I don't have to ask you about that. I mean, she's in the bald bracket. Yes. Christina Kattman. JP Morgan, Morgan Stanley, and Christina Kattman. But it's a crazy time. When you sit at the desk, is operationally the huge international bond space that you're in charge of, is it working, quote unquote, normally? I think the markets themselves are functioning. There's liquidity. But when you say, like, are things, and I guess it goes to your question about is it logical or is it, like, functioning?

21:17Because to say with all of the macroeconomic things that have developed in the last three months and stocks are where they are, you would you it's like a head scratcher of how are we here? It feels like we live in two different worlds and there's a lot of complacency about even what goes on with this Middle East situation. But we're all sitting here with the expectation was that this would be resolved in three weeks. And here we are three months later. And even from when we speak to commodity experts across the street, it feels like it's been this rolling three weeks out. We're going to have this severe pressure point.

21:52Should all of these things matter? Like, should there be flow through to the U.S. consumer? There absolutely should. But we're not seeing it yet. And that could just be the AI CapEx spend. It's just overwhelming it for now. But I think it does have to show up. Can you come back more often than just jobs day? I would love to.

22:15Apple Vacations, where your story starts. The Splash into Savings event from Apple Vacations is here. Now through June 25th, save up to$150 on vacation packages, plus instant savings at select resorts in Mexico, the Caribbean, Central America, and top U.S. destinations. Use promo code JUNE26 for these limited-time offers. Start planning today at AppleVacations.com or contact your travel advisor. Apple Vacations, where your story starts.

23:09Explore EVs that fit your life at electricforall.org. Paramount Plus is now the home of all your BET favorites. What? Yeah. With all new episodes of Tyler Perry's Divorce Sisters. You've always liked a little drama. Plus a whole new world of movies like Gladiator 2. Now I will control an empire. Original series like The Chi. Just make sure we protect each other. And live sports like UFC. Welcome to the history books. New home, same family. Your BET favorites are now on Paramount+. Subscribe now.