Instant Reaction: US Unexpectedly Sheds 92,000 Jobs in Latest Report

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2:05Claudia Sahm:This is a breaking news update from Bloomberg. Instant reaction and analysis from our 3 ,000 journalists and analysts around the world. I'm Alexis Christophorus, and these numbers just crossing the Bloomberg now. The Labor Department says the U.S. economy lost 92 ,000 jobs in February. That is worse than expected. We were looking at an additional 55 ,000 jobs. And, of course, this is compared to January when we added 130 ,000 jobs. The unemployment rate ticking up to 4.4 percent. The estimate there was 4.3 percent in the prior month was 4.3 percent. Checking wages month over month, up slightly to four-tenths of a percent.

2:47Claudia Sahm:Estimates were for three-tenths. And earnings year over year also a bit hotter, 3.8 % versus the 3.7 % expected. But again, the headline here, the economy lost many more jobs than expected, 92 ,000 in the month of February. Estimates were for 55 ,000. We also just got retail sales numbers out for the month of January. And they were down two-tenths of a percent versus the estimate of three-tenths of a percent. As for market reaction, it is swift. The Dow futures now down more than 400 points. S &P futures off 64. Guys. Claudia Sama over this as we continue with all of her good work here. These are the kind of numbers, Claudia, where amateurs like me go, okay, that means diminished GDP.

3:30Claudia Sahm:Is that correct? That all of the sun's back to a lesser real GDP where we're on the SOM recession watch? So not necessarily. You know, this so clearly these numbers from February are not in like, you know, checking the box on signs of stabilization in the labor market. Right. We're losing jobs. Unemployment rate ticked up. This is not a good sign. This actually sits pretty consistently, especially look at the last three months with what we saw all of last year. The U.S. economy last year created almost no jobs on net. Right. And at the same time, consumer spending increased, business investment increased, GDP rose for the year.

4:10Claudia Sahm:on trend, right? We can talk about concentration, we can talk about what sectors it's in, but we have already been for a year in a jobless expansion. So unfortunately, what the February data, what this latest labor market data suggests is that's still where we're at, right? And we have been looking for signs that hiring was picking up. And the January employment report gave some signs of that. January still is a really strong number, Even with down revisions, it's close to 130 ,000 still. But I mean, clearly to lose 90 ,000 jobs on net in February is a real problem. We're not creating jobs. It's that question of is it a problem?

4:52Claudia Sahm:That's a whole separate. And this has been a really difficult conversation to have. But we've been in this for well over a year now. So, Claudia, what do we know about the supply of labor? We know that this administration has effectively closed down the border, reducing supply of labor to some industries, whether it be housing, construction, agricultural, hospitality. What do we know with a year's worth of data here as to the supply of labor? Well, the estimates with immigration come in. It takes some time. We have updated estimates from the Census Bureau. We have updated estimates from Congressional Budget Office.

5:30Claudia Sahm:They're pulling in a lot of different pieces of data. These are still in flux, but it is very clear directionally. And it's also very clear in terms of magnitudes. These are large downshifts in immigration. And immigrants have been kind of on the margin additional workers in recent years. So it does, like, directionally, this makes sense. And I think that is important to keep in context. These shifts in job creation, going from, you know, hundreds of thousands of jobs created on net not that long ago to not creating any, and if maybe even destroying jobs on net in the U.S. economy, like that is a dramatic shift.

6:05Claudia Sahm:And the unemployment rate has drifted up. We're at 4.4 percent. So like we have to keep the like the magnitudes and the drama on the payroll side. It's not just about weekend demand. It is the supply. And that's a policy choice. But keep an eye on like the unemployment rate has drifted up. And that is there is still a problem. This is not just about supply. We don't have enough demand for workers. I mean, Claudia, to your point on a flat economy, I just did a three-month moving average, folks, in the back of my HP-12 seat. Oh, yeah. And the bottom line here is we've generated 5 ,660 jobs over the last 90 days per month.

6:43Claudia Sahm:I mean, that is, I've never seen that. That's like a flat economy. I have Claudia quickly here. I mean, there's a lot of negative statistics, Claudia. What does the Fed do with this information if labor matters? So they're watching they're watching all of this very carefully. I think the unemployment really does sum a lot of this up. The fact that, you know, the unemployment rate did tick up. We're still at low levels, but it has been drifting up gradually. They're going to keep I mean, this this returns some attention to the downside risks to employment. Right. This is all about the employment risk, the inflation risk today brought some of those employment risks back into focus.

7:22Claudia Sahm:But this is still largely a labor market that looks like it's working relatively well. Not a recessionary dynamic, but a very unusual dynamic. OK, it's unusual. But I mean, there's a lot of people flat on their back in this country, Claudia, saying cut interest rates. If Waller and company, Goolsbee and company, Hassett and company, if they cut interest rates, does that help the labor economy or is it now removed? Cutting interest rates is a way to stimulate demand, whether that's, you know, consumers going out, making bigger purchases they have to take out, you know, on their credit cards, buying a home, businesses making investment in equipment and software.

8:05Claudia Sahm:Like, it's a channel that can help. It is not all powerful. It's a very blunt tool. But, you know, that's the tool the Fed's got. And it is very clear from this Powell Fed they will defend the labor market if they need to. Dr. Sam, thank you so much for supporting us in your note and all your work with us. Claudia Sam with us this morning with new Century Advisors. We said good morning here with futures. Negative 40 went to negative 60. Now they're back negative 52 on futures. The VIX out two big figures, 25.82. Be sure Nadia doesn't leave the studio here. She's going to see the VIX out that much and go, I got to go.

8:45Claudia Sahm:Bloomberg, Suvain, let's just warning this jobs day. It's brought to you by IBKR. Will the year-over-year change in the U.S. CPI? Will it exceed 2.6 % this February? Turn your view into a trade at IBKR.com slash forecast. Last trading day, it is March 11th. One of my favorite things, it's like the miserable winter. It was a great song. Arlo Guthrie sang it. Northampton winter. That's what it was like at Smith College. Joining us now, Nadia Lovellier from the Union Bank of Switzerland, Israel. What was the coldest morning at Smith College? I mean, there must have been one where you just said, this is terrible.

9:29Nadia Lovell:Terrible, especially since I'm from an island. So it was quite brutal. You were not used to it. I was not used to it at all. But I've adjusted. You were forced to study as well.

9:41Claudia Sahm:Thank you so much for coming in. I just with a geopolitical shock and with this economic data, someone with a measured view, do they just sit back and watch the show unfold? Or is this a point of action for UBS?

9:58Nadia Lovell:You know, I'm still in the studio. I didn't escape. Although when I did see the numbers, I said, oh, this is not a good combination right now, particularly, you know, because the narrative had been that there was stabilization in the labor market. And then this is causing questions to that. And it's a little surprising just given the data that had been coming through initial jobless claim and also some of just a survey. Beige Book said that there was stabilization. So this is a little bit perplexing and put the Fed in an opposition at the same time that you have inflation risk rise and geopolitical tension.

10:30Nadia Lovell:But I would say at the core, you know, it's too early for us to fundamentally change our view. And so it's sort of stay the course, stay invested in this. Do we have to reassess some potential rise in risk around where markets could go in the next few months? Absolutely. You know, in terms of like, do we want to take on more defensive positioning? We're not quite there yet. We need to see a little bit more data because we know that there's some dislocations and peculiarity that's going to also happen in the labor market.

10:57Claudia Sahm:Nadia, one of the challenges, I guess, for this market is that it's been led for the longest time by technology information services, the names we all know, maybe the Mag7, but broader than that. Those stories are now under pressure. The AI story has kind of morphed a little bit, and it's not just a net positive for AI. Now people are asking tough questions. How do you think about tech as a leader in this market?

11:19Nadia Lovell:You know, we did downgrade tech and comm services to our neutral. So that's an indication to us that it's no longer going to be a leader of the market. Now, that's not to say that it's going to continue to drag down the market. We do hope to see some stabilization intact. You know, the AI tailwinds are still there structurally, but obviously you see volatility pick up. And so you have to be a bit more selective in this area. It's not so much about the sector. It's how you position across the AI value chain. That's a distinction that you're seeing. Because, you know, the beneficiary of the CapEx spending has really been the semiconductors as well as the memory software is under pressure.

11:56Nadia Lovell:And so we think that it's about more about, you know, positioning properly across AI value chain and not so much within, not so much about the sector as a whole.

12:05Claudia Sahm:Nadia Lava with this, UBS Growth, Global Wealth Management. You publish, thank you for publishing your target here for December year-end, nine months away. And it's a double-digit view. There's an enthusiasm here. How do you acquire shares given the hour by hour buffeting we're getting right now? Brent crude,$89.29. But you're basically saying into the next year, acquire shares, right?

12:34Nadia Lovell:Basically, you know, and I think it's because, again, we know geopolitical race and shocks tend to be short lived. And while they can cause some near term volatility, we'll sort of see how things play out in the next couple of weeks in the street of Hormuz. And if if oil, the flow of oil can resume in a meaningful way, we think that if that happens and you should see some normalization in energy prices. And that's why we think that ultimately crude oil, Brent, will get back down to sixty seven dollars by the end of the year. because there is excess capacity in the system. $67, Brent, by the end of the year.

13:09Nadia Lovell:Because we do think that there is, you know, capacity in the system. What's causing the spike, we know, is just concern about the disruption near term. And we know that geopolitical risk markets tend to bounce back. Now, again, we'll see where, you know, GDP kind of comes in. We know that there's consumer stimulus coming from the tax returns. Let's continue to watch the labor markets. And so when we look at the picture now, yes, this job reports does, you know, cause us for a pause to reassess a few things. But when we look at the picture collectively, even before today, it felt like this economy was on pace for above trend GDP growth.

13:43Nadia Lovell:And that's still our core view. And so if you have that as well as earnings growth at double digits and the broadening out, we all have in that broadening out. Right. I think you can get, you know, to double digits by the end of the year. And we've seen that in past periods where you've had your political shots.

13:57Claudia Sahm:Going back to the first time Nadia Lovell went in the Iron Horse Cafe in Northampton. Well, I've never seen a market slash economy like this. It's nuts. Look at the labor economy. We're flat on our back. That's the summation. And the GDP numbers are like shocking. Shockingly. They're hanging in there. I mean, so we have seen a rotation starting late last year out of some of the tech names you were talking about into some more industrials and maybe smaller mid-cap. Is that something you guys embrace? Do you think that's a longer term trend?

14:31Nadia Lovell:We have. And, you know, we did upgrade industrials in the last month or so. And that really, again, it's like playing into that, you know, cyclical uptick that we do expect. You've seen it in ISM, you know, manufacturing services all above expectations in the most recent numbers above 50. And then you also have, you know, defense spending that we expect to continue to be robust and increase. And then the structural growth story that's happening in the structures is the electrification story and the build out of electrical grids and monetization and around AI. And so we do think that that cyclical story feels like it's still intact and you want to have some exposure balance in the portfolio, not just structural growth, but also some cyclical.

15:12Claudia Sahm:Can you come in on Sunday?

15:15Nadia Lovell:Tom, you know, I was working this past Sunday, so I can't be here, but I will be working.

15:21Claudia Sahm:Okay, I'm going to just rip up the script right now. Nadia Lovell with us out of Smith College and I bust her chops, but we're talking double major mathematics physics. I want you to talk to everyone listening across this nation about the motivation necessary, all the biases against girls doing STEM, and it's improved, it's gotten better. What was it like when you chose to do mathematics and physics?

15:53Nadia Lovell:You know, thankfully, I did it at Smith, which was a quite supportive environment. You know, being able to look out to other women physicists at the time at Smith College. And I think that we continue to break those glass ceilings and to show that, you know, women, just like anybody else, have the chops to do it. and I think that that's a great story to continue to tell.

16:17Claudia Sahm:The nurturing, seriously, and I adore Mount Holyoke. That's a school. Duke, folks, for these of you who don't know this, Duke Chapel Hill is sort of like Mount Holyoke Smith as well. But there's something about, and I'm talking my book here, folks, Afterthought did the all-girls thing. There's something about the nurturing environment. It's okay for you to do Newtonian physics in an all-girl environment.

16:40Nadia Lovell:Well, I think it's okay to do it anywhere, right? But yes, it can be a bit more encouraging when you're in a classroom with other women. I mean, people like to look up and to see what, you know, someone that looks like them doing the things that they want to do.

16:54Claudia Sahm:When you're in UBS and you're with some smooth investment banker who took marketing at, you know, some school, and they're looking at you like, and you're like, shut up. I mean, what's it like bouncing off of Global Wall Street with your academic background?

17:09Nadia Lovell:Well, thankfully at UBS, but particularly in the chief investment office, I would say a lot of us do have a very strong analytical background.

17:17Claudia Sahm:Yes, out of Zerk, that's definitely the background.

17:19Nadia Lovell:So that is definitely the case. And I wouldn't even say where I started my career. One of the things that attracted, you know, at the time I started a capital group, managers of the American funds. And again, strong math background. Most people did have that. So again, encouraging environment.