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

0:00Nadia Lovell:When the rest of the markets slow down, the futures market keeps moving. Did you know that CME Group S &P 500 and NASDAQ 100 futures trade nearly 24 hours with great liquidity? In the ETF markets, volume and liquidity lessens after 4 p.m. until the next morning. But with futures, you get trading opportunities both day and night. Learn more at cmegroup.com slash equity futures. The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work.

0:46Nadia Lovell:Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM.

1:22Nadia Lovell:dot com slash leaders. 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. 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%. The estimate there was 4.3 % in the prior month was 4.3%.

2:11Nadia Lovell:Checking wages month over month, up slightly to four-tenths of a percent. 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.

2:47Claudia Sahm:Claudia Sama, this is we continue with all of our good work here. These are the kind of numbers, Claudia, where amateurs like me go, okay, that means diminished GDP. Is that correct, that all of this 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.

3:26Claudia Sahm: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 on on trend right it may 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 with 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, you know, the January gave some the January employment report gave some signs of that. January still is a really strong number, even with down revisions.

4:07Claudia Sahm:It's all you know, it's close to one hundred thirty thousand still. But I mean, clearly to lose ninety thousand jobs on net in February is a real problem. Claudia, it's a it's a we're not creating jobs. It's that question. Is it a problem? 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.

4:27Nadia Lovell: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?

4:48Claudia Sahm:Well, the estimates with immigration come in. It takes some time. We have, you know, updated estimates from the Census Bureau. We have updated estimates from Congressional Budget Office. 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 and the unemployment rate has drifted up right 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 we can 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 hp12c oh yeah and the bottom line here is we've generated 5 660 jobs over the last 90 days per month i mean that is i've never seen that that's like a flat economy.

6:15Claudia Sahm: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 all of this very carefully. I think the unemployment really does sum a lot of this up. The fact that 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 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, but this is still largely a labor market that looks like it's working relatively well.

6:56Claudia Sahm:Not a recessionary dynamic, but a very unusual dynamic. Okay, 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. Like, it's a channel that can help.

7:36Claudia Sahm:It is not all powerful. It's a very blunt tool. But 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. Bloomberg surveillance this morning.

8:15Claudia Sahm:This is 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.

8:57Nadia Lovell:Terrible, especially since I'm from an island. So it was quite brutal.

9:02Claudia Sahm:You were not used to it.

9:04Nadia Lovell:I was not used to it at all. But I've adjusted. You were forced to study as well.

9:09Claudia Sahm:Thank you so much for coming in. 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?

9:27Nadia 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 rising geopolitical tension.

9:58Nadia 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 core, 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 discolocations on peculiarity that's going to also happen in the labor market. 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.

10:38Nadia Lovell:The AI story's 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? 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 in tech. 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.

11:10Nadia Lovell:It's not so much about the sector as the way 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. And so we think that it's about more about, you know, positioning properly across the AI value chain and not so much within, not so much about the sector as a whole.

11:33Claudia Sahm:Nadia Lava with this UBS Growth, Global Wealth Management. You publish, thank you for publishing your target here for December. You're in 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?

12:02Nadia 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 Strait of Hormuz. And if if oil, the flow of oil can resume in a meaningful way, we think that 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$67 by the end of the year because there is excess capacity in the system. $67, Brent, by the end of the year. Because we do think that there is, you know, capacity in the system.

12:41Nadia Lovell: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. And 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. And that's still our core view.

13:13Nadia Lovell: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.

13:26Claudia 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.

13:44Nadia Lovell: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 that you were talking about into some more industrials and maybe small and mid-cap, is that something you guys embraced? Do you think that's a longer-term trend? Yeah, 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.

14:19Nadia Lovell: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.

14:40Claudia Sahm:Can you come in on Sunday?

14:43Nadia Lovell:Tom, you know, I was working this past Sunday, so I can't be here. but I will be working.

14:50Claudia Sahm:Okay, I'm going to just rip up the script right now. Naughty Lovell with this 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?

15:21Nadia 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.

15:45Claudia Sahm: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.

16:08Nadia 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.

16:22Claudia 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?

16:38Nadia 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.

16:46Claudia Sahm:Yes, out of zero, that's definitely the background. So that is definitely the case.

16:48Nadia Lovell: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.

17:03Claudia Sahm:Robin Wigglesworth is a great write-up on capital group. active again, really struggling, but Capital Group doing better than most there as well.

17:11Nadia Lovell:Yeah, LA, LA, TCW and Capital Group. Those are your two anchor meetings in LA. This is great. I needed to go to warm weather after Smith. Yeah, exactly, smart.