Instant Reaction: US Adds 165,000 Jobs, Topping All Forecasts

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0:38Get started at ChachiPT.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. The October job numbers are crossing the Bloomberg terminal and they show improvement from September. The U.S. economy adding 165 ,000 jobs in October, more than double what Wall Street was estimating at 70 ,000 and much more than the 29 ,000 we saw in September. And we also saw the jobless rate now slipping to 4.1 % versus estimates for 4.2%. It was at 4.2 % the prior month. Now, this jobs number, this gain of 165 ,000 in line with the highest estimates and above what most see as the so-called break-even rate.

1:37That's the pace of job gains needed every month to keep the unemployment rate stable. Taking a look at the inflation component of this report, we are talking workers' wages. Average hourly earnings month over month up four-tenths of a percent, about a tenth of a percent better than expected and much better than the tenth of a percent rise we saw in September. Year over year, average hourly earnings up a better than expected, 3.1 percent versus the 3 percent we saw in September and a 2.9 percent estimate. estimate. The labor force participation rate also improving a bit, 61.9 % versus estimates for 61.8%.

2:13The underemployment rate at 7.9 % estimates were for 7.6%. Just want to point out today's report follows recent jobless claims data showing companies are holding on to workers. So it appears this is still a low fire, but maybe a more higher environment. Once again, the unemployment rate at 4.1 % for the month of October. We added a much more than expected 165 ,000 jobs. That is a look at the October jobs report. Back over to you guys. She just like lights out. You have no idea the skill of what Karen Moscow and Alexis Christoffers does. This gives Dr. Sam time to look at this data. Claudia, I see two Americas.

2:55I see a boom with revisions 249 ,000 boom number on nonfarm payrolls. And I see the Greenspan underemployment rate going from a 7.6 % up to 7.9%. Is this a fully employed America? The labor market has had this really uncomfortable, curious balance of the low hiring, but the low firing, right? So it really still is a difficult environment if you are looking for a job or a better job to get that. But people are holding on to their jobs, which is a good thing, right? The layoff rate is low. It's very unusual. So I think it does give this view of like there's two Americas in the labor market and there's some truth to that.

3:44But we do like to see, I mean, the payroll numbers, surprise to the upside. You know, as I said before, we've seen some big surprises like this earlier in the year And then they ebb away. You know, so I've got to see some months of this before I'm really convinced we're seeing an acceleration of the labor market. But, you know, good news is good news. And the unemployment rate, the overall unemployment rate did tick down with participation going up. So, like, that's a good setup. So we're going to take the good where we have it. But we have been head faked by this labor market in terms of acceleration several times this year.

4:19Paul, am I right? Kevin Hassett of the White House will be with Bloomberg. Yes. Nine-ish. Yes, we're going to have him and we'll get his thoughts here. Paul Sweeney with Claudia Somm. Average hourly earnings on a year-over-year basis, Claudia Somm, came in a little bit better than expected at 3.1%. Are you surprised that number's not even higher given how tight the labor market is? Why can't I walk into my boss and say I need 10 % increase if you want to keep me? Well, I think the boss will be like, good luck in that job. I mean, that's the thing right now. And I watch really carefully the quit rate.

4:48So we did get an update on jolts this week. And there was, you know, a little tick up, but it's still pretty low. And that's a good sign of the bargaining power. If workers are out there quitting to get better jobs, that's when they have the leverage for the higher wages. It just does. It's just not there right now. If you don't have hiring being strong, the workers just don't have that ability to bargain. Can we like do like there's no recession talk, but can we do like Claudia Sam wheelhouse here? Sure. Claudia Sam wheelhouse, folks. She's famed for looking at how an economy slows. Let's go to the opposite way, Claudia.

5:24So when you studied at Michigan, you never, never thought about a sustained 6 % or more nominal GDP. How do you presume with our new politics that we will bring in this boom economy constructively? So, you know, there's a lot of pieces to that. I do think going back to the question about immigration policy, labor force policy, I'm less looking at the downturn in the labor market, but I am worried about some of the structural pieces of the labor market. And I think without a growing labor force, it's going to be hard to really consistently have those GDP gains. I mean, I am optimistic about some of our technology improvements on the horizon, but that is really tough to string together quarter after quarter, year after year improvements and productivity growth.

6:15Right. And so I think you've got to have a multi-pronged approach in terms of the policy. Hanging our hats on A.I. is not the way to go in terms of really like wanting to keep those those strong growth numbers. I think there are some structural pieces on the labor market that deserve attention and may very well get some attention given the election results this week. Labor force participation rate, again, a little bit better, 61.9 percent. Where's a healthy number? Like what should we be looking for? Is that a good number, 61.9? Should it be higher or lower? Yeah, I mean, it is hard. You know, work is onerous, right?

6:49We don't want 100. People should have a choice as to what they do. I think given the fact that we have so much aging of the workforce, probably keeping a focus on the prime age. So, yeah, no, I'd say, well, you know, people should get to retire at some point if they want to. Some point. But I think looking at the prime age statistics, which have been really pretty solid. But there's always, you know, there's the separation of like we look month to month, quarter to quarter at the labor market. And then there's the big picture. I mean, we've had some demographic groups that for decades have been puzzling, like men, prime age working used to all work.

7:27And there's been declines over many decades. So then there's questions about why is that happening? But that's not this near term discussion. So I don't have a ready answer of what's the right number because it depends on people and their lives. Spearheading our labor coverage, I should say. Claudia is with us. Thank you. Thank you so much this morning. Look for her publications. And, of course, wonderful out on Twitter and particularly on LinkedIn as well. With a bigger, broader picture, futures up 10. Nasdaq up where it was pretty much level 1.3 percent. But yields higher today. Ten-year yield by a solid four basis points as well.

8:07Constance Hunter joins us. chief economist at U and her work with Julia Coronado, Macro Policy Perspectives as well. Constance, I look at this, and it's clearly a fully employed America. Link it to what we observed in the election. I see two Americas, and there's an America that isn't in the jobs report this morning. Well, if we look at the voter turnout, a lot of the voters probably had jobs, right? So I wouldn't say that this was an election determined by the unemployed. We have a very low unemployment rate. And of course, remember that 33 percent of the population are made up of independents.

8:48And those are the swing votes that put the sort of moderate Democrats in states like Iowa and Nevada and Texas into office, even in Ohio, I would say. So I think that this election is a reflection of what's happening in foreign policy with Iran and possibly Ukraine, what's happening with inflation. That was the number one issue. And it doesn't necessarily mean that the economy isn't churning and working underneath. It's just people are still feeling the effects of the price, the level changes we had during COVID. Then they didn't dissipate. then we've had another step up in levels. And and that is what people voted about.

9:34So that kind of goes to the issue. Again, we look at average hourly earnings on an annualized basis constants up three point one percent. That's better than forecast, better than last last period. We had an upper revision for last period, actually the three point two percent. But that's just not keeping pace with inflation for most people. That's something's got to give there. Well, it's a double-edged sword, right? Certainly what we don't want to see is we don't want to see runaway inflation that's demand pull. And so what we see here is a lot of cost push inflation. And the Fed is trying to curb that.

10:09You had Beth Hammock and Barkin coming out yesterday. Barkin, who will be a voter in 2027, saying the Fed should raise rates. And what I'm looking at in this labor market is sort of how durable is it? And when we look at things like the diffusion index, we had a solid increase there. And one of the things that I've been watching this year is the mix of cyclical versus non-cyclical jobs. And now let's remember the big concern when we were coming off the COVID highs, that we were still having high headline prints, but it was dominated by health care and government and social assistance workers, non-cyclical jobs.

10:43Now we're in a situation really starting this year where we can see a surge in cyclical jobs and cyclical jobs are dominating the hiring. That suggests that there's some underlying economic momentum. Now, it may take time for people to feel that, but it's certainly there in the data. So given the labor backdrop, what's your view of the consumer going forward here? It's kind of, boy, if you have a job, that's a big, big part of the game here. Is the consumer OK? I think the consumer is OK. And a lot of it is going to depend what does happen, for example, with the Iran war and with gas prices. You know, we're getting oil out of the Gulf because we are engaged in escort operations.

11:30But it's very expensive to get that oil out. And so the market, the oil market, is pricing in all risks around that. If we see a resolution to the Iran war, I think, and you see a really durable structure built around getting oil and gas out of the Gulf of Hormuz, or the Strait of Hormuz, then you're going to see oil prices come down. That's going to give immediate relief to people's pocketbooks. Constance, what are you going to write about this weekend? Folks, commercial free for you for the next 20 minutes. Christina Katmany coming up with Invesco, but right now, Constance Hunter, EIU. What are you going to write about this weekend?

12:06I mean, you have such a broad mandate. I'm just fascinated. What's the Constance Hunter theme? Well, I'm looking at really what is happening with this global AI sell-off, right? So you had Hong Kong down. You had Taiwan down. Taiwan is engaged now in pricekeeping operations to stabilize that market. Where are those fault lines? We still have Japan engaged in this massive carry trade, invested in inequities around the world. Are we at a tipping point there? what is happening with regard to economic policy that the Democrats are going to be able to enact. And obviously, this comes down to the state level.

12:44And one of the big themes that the market has been focusing on over the last several days is this sort of curb of AI build out. And so really the thing is, to what extent is that happening? And are we talking about an end or are we talking about some more sensible policies that make it more palpable to the general public? Because if the public is really against the AI build-out and we don't do anything about it, then we would have such significant backlash down the road. So I'll be looking at all of this and really thinking about what are the economic vectors we need to look at going forward. But if I were looking at just this jobs report and not thinking about the shock of the election, I would say that we are on solid footing based on this jobs report.

13:30Thank you so much. Constance Hunter with us here. From E-R-U-A. If you invest, lead a business, or allocate capital, one-sided views aren't enough. Join me, Brad Rogoff, the Global Head of Research at Barclays, on the Flipside podcast. Each month, I go head-to-head with one of our expert analysts on my global team to debate the economic and market issues that matter most. From inflation and AI to equity and credit trends, each debate helps you see what headlines might miss. Find the Flipside wherever you get your podcasts. This is the Bloomberg Tech Minute brought to you by Chachi PT. I'm Carol Masser.

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14:45Unapproved peptides, which are marketed as research chemicals, have been circulating in what's become a billion-dollar gray market amid the rise of do-it-yourself medicine as people increasingly turn to social media or artificial intelligence for medical help. That's the Bloomberg Tech Minute brought to you by ChachiPT. Get started at ChachiPT.com. The last time Christina Katmany came in, for whatever breaking news reason, we were so rude. You were here for two questions or something. Investor called up from Atlanta and said, how can you treat her like that? So for a long conversation this morning, Christina Katmany on this crazy global bond market and what it says to us.

15:27Were you in college at Villanova with Jalen? I wish I could say I was. He's a number of years younger than me. But we have cheered him on. They're just over in Rome? Yes. Yes, they were. Did that work out? Did you go? We did not end up going. I was actually in Rome with a Villanova crew in May. But I feel like with the marathon and Halloween and the little kids, stayed stateside this time. We're dying on Yield this morning. What an honor to go from Priya Misra to you, Ira Jersey, coming up later with Tony Crescenzi as well. As I said, in this blur that we're all in, what will you write about or think about through the weekend on yield?

16:08Well, it's interesting because we were even saying coming in today, like it's payroll Friday. I completely forgot. And you're like, the market is most not focused on payrolls. And again, that's a big number. Those are big revisions. Even if you look at the three-month, I was looking, there are three-month moving average now for payrolls is 119. The sixth month is only 73. There's still like big gaps, but I don't think that's where the market's focused at all. I mean, it's been such a roller coaster week between elections and changes in oil prices and what's going on in the Middle East and obviously equity markets and AI.

16:43And it's just this confluence. Everyone's like, where are we and what is the driving path forward? And it feels like there's a lot of like fear and agita in the market for sure. How did the debt markets perform over the last few days? Because even during all this craziness, Medi came to market again with a euro bond offering. So, I mean, how's the bond market these days? So, we've actually, again, we sold off. I mean, it's been adrift to higher yields across the board, across the curve, across the globe all year. And we kind of got the peak five or six weeks ago. And for five or six weeks, we've retraced 40, 50 basis points kind of in every point across the curve.

17:23It feels a bit overdone. I think some of that was positioning. I think some of that, again, is this fear about AI. But I'm not sure that the underlying has changed so much. We also, I think, are still grappling with this Fed that doesn't want to have forward guidance from the chair. But the rest of the committee is giving forward guidance. And we have very different messaging meeting to meeting. So I think there are people out there that think like there are real recession fears and this is the end of AI. We're a little skeptical of that. I think the base case is still that the Fed is going to go in December.

17:58And if you if you didn't get that communication ahead of the last inflation prints, you would have expected them to go in October as well. All right. So, again, the the Fed probably is going to do what it does in markets pricing in certainly one for December, maybe one or two more for next year. But again, I kind of go back to all the craziness this week about AI and about what it means for AI. Right. Again, Meta just came out with this mega euro bond offering. So it kind of feels like the market. Did you buy it? We have been a bit cautious on some of the hyperscaler issuance. So we were not involved.

18:35But I think the market is also grappling with. There are these massive CapEx numbers out to 27, 28, 29. And so I think it's a question of does this blue sweep, does that change the speed of of all of this build out? does it change that? I love that. It's about the speed. It's about the first and second derivatives. I think it is. I mean, we have had just exponential growth. And CapEx has been what has driven US growth this year, right? That's not a deniable thing. It has been in the driver's seat. But I think people are still, credit spreads have moved, but are still tight by historical standards.

19:19I think people are being choosy and they know that because of this pipeline, there's a lot more to come. But I mean, deals are still being taken down for sure. Absolutely. Focus this week here was on U.S. domestic elections. You guys think globally. So what's your non-U.S. call these days? So I think FX is a little trickier. When we take a step back, we still are a bit more negative, the dollar. But that has been a bit challenge. You haven't had participation from Asia. I think that is, or dollar Asia. And I think you need to see dollar Asia resume lower. So the likes of the yen finally participating and strengthening, Corona coming back to the table, some of those to see a broader FX rally, weaker dollar.

20:10And then globally, again, we still say we've rallied now 40, 50 basis points in the U.S., the rally has been driven by the or has been led by the U.S. more than the rest of the world. So we do still think that there's value in some DM. We think Europe has probably more value there. It's a kind of weaker underlying growth system. And in EMs, too, I mean, Brazil, obviously, was that only this week? The second round election, maybe that was last week. I don't know. It's been it's been a whirlwind. But it has been. October was a long month. Rob Waldner of Invesco wore a bow tie. Oh, yeah. That's how, I'm sorry.

20:51I mean, was there like a - He had to match your style. It was amazing. Rob Waldner driving all the research at Invesco. So let's summarize this for mere mortals. I mean, you and Paul are like pro discussion. In this uproar, if I have fear of missing out in the Christina Katmany world, am I buying credit? That's a Paul Sweeney question. Am I extending duration? How do I express fear of missing out? Because to me, what no one's looking for is price up, yield down. Yeah. So it's funny, our latest big right on our whiteboard in the office says less FOMO. So we're not doing fear of missing out. But I think a global fixed income portfolio still make sense.

21:36We don't have to just be concentrated in the U.S. We're coming off 10, 15 years of U.S. exceptionalism. We still think there's a case for global fixed income. Can you buy French paper? Not before the election. No, there's no need. We need to be wise about our choices. I think, again. I love harassing her. Thank you, Cy, for that question. It was very rude. We have another six months before the election in France. I think it will be noisy. Will there be opportunities to play? Yes. Are European government spreads exceptionally tight? Absolutely. So what that comment was is so Rob Waldner hears her say that.

22:15Yeah. So she gets a junket to Paris to do research, Bob. Post-election. Absolutely. I'm heading to Atlanta next week. Don't get me in trouble. Christina, in your portfolio, how do you guard against AI concentration here? Because It's not just owning an investment bond or something, but if you own a utility bond in Virginia, that might be. Yeah, yeah. It really, again, I think it goes back to that has been the driving story and the driving force of the U.S. economy this year. So it has been it's been utilities. It's been the chips. It's been the hyperscalers. It it feeds into all of these things.

22:51We have been and you guys know this from our conversations a bit more cautious on our of our three levers, FX credit, Ford exchange credit or rates. We've been the most cautious on credit just because of how historically tight we are. I think that still kind of remains our bias. I think there's still not really a case that you need to extend out the curve to duration yet. One question from Stephanie Ross. People are like, let's get to Stephanie. I'm like, OK, I got one more to Christina here this morning. I can't emphasize enough the hysteria around hedge funds, bonds. Was it core weave? Yeah.

23:28Like it's like a 16, 15 percent yield or whatever. How should our listeners and viewers separate the noise of AI garbage paper from the real world of capturing a coupon? Look, I think like anything, like with stocks, with bonds, especially as an individual investor, to go be chasing the one name, the highest yields like there's obviously all inherent risk in that. I think broad portfolios, diversification, you want exposure to the theme. And I think when we take a step back, the theme of AI is because of the election or because of a wobble in equity markets is not going away. Right. The pace may slow down.

24:11The way it's implemented may change. But I don't know. Even we look at our own world and how your job has changed in the last six months and what we're trying to incorporate. That's not stopping on the switch of a dime. right? Christina, thank you. Christina Kemeny with Invesco here this morning. Greatly appreciate it. As we go to Stephanie Roth here, we say good morning across America. I guess it's a fully employed America. Change in nonfarm payrolls, two-month revision. Even I could do the math,$249 ,000, a big 165 number plus 84, a nice revision upwards. A lot of other data which bent price down, yield up.

24:53The 10-year yield now three basis points, two-year yield explodes, higher yield by six basis points. Stephanie Roth to look at the economics of the moment. Stephanie, can you program out with this jobs report, with the inflation reports, with the data, can you program out a continued buoyant nominal GDP? Yeah, I think that's the environment that we're in. I think it will be slightly less than where we've been running. You're probably talking more like a 4.5 % nominal GDP for 27 as opposed to something that's notably higher as where we've been. But it's still a robust economy and one that's incrementally going to be driven by real growth as opposed to inflation.

25:34This year, the mix was a bit different because inflation was just running so hot for a variety of reasons. But overall, the economy's buoyant. And it's not just AI. The economy is running on firm footing outside of just the sort of the AI CapEx space. So, again, the change in nonfarm payroll data we got today says, you know, the U.S. labor economy is in pretty good shape. All right. If that's the case, let's turn to inflation here. What's your inflation call for 2027? Because I've got, you know, energy prices whipping all around here based upon whatever the latest tweet is. Yeah. Well, when you think about sort of forecasting into the future, energy prices are not going to repeat.

26:09I certainly hope they don't repeat what happened in this year in terms of sort of year-over-year growth rate. So you're naturally going to get disinflationary pressures from oil prices, even if they stay where they are. And there's good reason to believe that oil prices may sustainably come down a little bit. Therefore, you're going to get disinflation on a year-over-year basis from the things that were elevated this year. So anything related to sort of energy prices, anything from airfares, you're going to have the tariffs roll off the data. So all of these factors that kept inflation elevated this year because they were largely one off will fade into next year.

26:48And we're looking for at two and a half percent inflation, which is certainly higher than what the Fed would like, but something that's a lot more tolerable. Stephanie Roth goes right to where I want to go. It's like the budget lab at Yale, Natasha and Martha and all that. Stephanie, do you frame out an amendment to our tariff policy, given the political bombshell two days ago? I think the tariff policy is largely unchanged. Really? The revenues are kind of too high to really make any adjustments from that perspective. So tariffs are going to remain. Come on. Come on. Stop. We're addicted to tariffs at a fiscal basis?

27:23Kind of at this point. And I don't even think even if we have a Democrat and win in 2028, I'm not even sure they're going to bring down tariffs all that much, maybe on a targeted basis. But my expectation is the tariffs will remain elevated for quite some time because from a deficit perspective, it's not really attractive to trim them so much. I believe my recollection is the president of the United States touched on this with our John Micklethwaite in conversation. OK. Once the tariffs are in, they're like an addiction to politicians. Yeah, I guess so. You and I are paying them. Yeah. Look at the tariff on your Vespa.

28:00I know. That was unthinkable. That was unthinkable. So, Stephanie, given this backdrop here of a pretty firm labor market, a market where in 2070 you should see inflation come down somewhat. What does that mean for our Federal Reserve then? So these cases, they still go in December. They get that markets have been pricing the odds down. the last couple of days, just given the concerns around AI, provided that the financial markets kind of hold up well enough between now and the December meeting. They're very likely to go in December. They certainly communicated that they want to hike again. The data have been firm.

28:35It's not accelerating a bit. And then we think they'll probably go once more at the beginning of next year in Q3, probably at the March meeting. And then at that point, you'll see the inflationary pressure subside a bit. You might see activity cool down modestly, and then the Fed can just kind of wait and see. and then they'll be kind of on hold for quite some time. So, again, that's a pretty interesting backdrop because that sounds like things are generally in pretty good shape. How do we think about it from the consumer level? Because, again, we have the K-shaped economy, but we don't see it in consumer spending.

29:06Consumer spending continues to hold up pretty well. That's the case for a lot of this year. The consumer has held up really well, even though the bottom end of the consumer has certainly been a lot more challenged than everybody else, but because the strength has been persistent across the spenders that spend more, it's been masking any softness that's been happening at the bottom. That will probably just continue. We're likely to see, especially given the data that we got today is just further confirmation that the labor market is good, you're likely to see spending continue to remain fairly robust.

29:40It's largely a function of nominal income growth, which is tied to the labor market, How much are people working? How much are they getting paid? All of those trends are moving in a positive direction. Energy prices, you know, the margin might come down a bit, which could then fuel a bit of a pickup in consumer spending for next year.

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