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Instant Reaction: US Payrolls Marked Down a Record 911,000 in Preliminary Estimate · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
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  Speaker 2: This is a breaking news update from Bloomberg instant reaction
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  Speaker 2: and analysis from our three thousand journalists and analysts around
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  Speaker 2: the world.
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  Speaker 3: Good morning everyone, Scarlet fo In, Tim Keene and A
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  Speaker 3: Scarlett who predicted it didn't come in. But there is
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  Speaker 3: the first print of this preliminary number, and it is
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  Speaker 3: toward what we heard from doctor Englander. Scarlett. I'm going
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  Speaker 3: to suggest a negative nine to one one is a
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  Speaker 3: wow statistic. We begin strong in the special edition of
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  Speaker 3: Bloomberg Surveillance with Ira Jersey of Bloomberg Intelligence. Ira, I
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  Speaker 3: guess we see an economic statistic three hundred thousand or
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  Speaker 3: so off the mark. What does it mean for a
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  Speaker 3: bond market to see our labor so beleaguered?
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  Speaker 4: Well, I think the You know that these revisions are
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  Speaker 4: very hard to forecast, I mean by definition, because they
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  Speaker 4: cover such a long period of time, and you know,
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  Speaker 4: but the fact that we had even slower employment growth
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  Speaker 4: than we thought and had forecasted, clearly the market took
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  Speaker 4: that as bad for the economy, and that's the reason
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  Speaker 4: why you saw bond yields go from up a little
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  Speaker 4: bit in the front end to flat to maybe a
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  Speaker 4: little bit a little bit lower in the front end. Importantly,
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  Speaker 4: I think here it just shows that, you know, the
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  Speaker 4: Federal Reserve has to take this into consideration when they
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  Speaker 4: deliberate next week what to do with interest rates. And
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  Speaker 4: it just solidifies even more that they're going to cut
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  Speaker 4: next week. And I suspect that it might actually give
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  Speaker 4: some of the people are on the fence about the
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  Speaker 4: timing of cuts to not only cut in September, but
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  Speaker 4: also do a string of cuts and cut again in October, December,
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  Speaker 4: and January as well.
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  Speaker 1: To your point about how it's very difficult to forecast this.
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  Speaker 1: In a survey of economists that Bloomberg has compiled, the
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  Speaker 1: lowest estimate for this revision was nine hundred thousand, and
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  Speaker 1: the actual number reported was nine hundred and eleven thousand
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  Speaker 1: reduction in the number of jobs over the twelve months
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  Speaker 1: to March twenty twenty five. So we had expected a
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  Speaker 1: negative revision, perhaps not this sizeable. How much of this
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  Speaker 1: was totally baked in to the point where a fifty
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  Speaker 1: basis point raycut is something that is now becoming more
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  Speaker 1: of the default scenario.
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  Speaker 4: Yeah, well, you know, I don't think that the Fed's
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  Speaker 4: going to go fifty, and the market's not fully priced
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  Speaker 4: for that, not even fifty percent price for a fifty
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  Speaker 4: basis point raycut. At least it wasn't when I walked
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  Speaker 4: in here. I haven't checked in the last two minutes,
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  Speaker 4: but I doubt that it's really changed. And one of
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  Speaker 4: the big reasons for that is there still is this
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  Speaker 4: inflation overhang, right, the fear about tariffs may be still
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  Speaker 4: adding to some inflation. We haven't seen all of it.
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  Speaker 1: You've heard a.
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  Speaker 4: Lot of Fed speakers talk about the net effect of
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  Speaker 4: tariffs hasn't yet been seen. So I think the Federal
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  Speaker 4: Reserve wants to be cautious, right, and the idea that
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  Speaker 4: they don't have to go at every meeting. I think
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  Speaker 4: that's what this takes off the table that unless you
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  Speaker 4: see a you know, insanely low CPI print, and you know,
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  Speaker 4: tomorrow's PPI winds up being very low as well, at
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  Speaker 4: least below consensus, then the Federal Reserve probably just does
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  Speaker 4: their twenty five. Then they guide, right, and it's that
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  Speaker 4: guidance I think that will ultimately move the bond market
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  Speaker 4: and does that guide and say, hey, we're going to
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  Speaker 4: cut you know, one hundred and fifty hundred and twenty
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  Speaker 4: five fifty basis points. Maybe that's where the updated dot
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  Speaker 4: plots going to matter, as well as their general summary
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  Speaker 4: of economic projection.
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  Speaker 1: In terms of the reaction in markets, I mentioned how
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  Speaker 1: the tier yield the tenure yield went negative briefly, but
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  Speaker 1: they're back up again, and we're now seeing the two
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  Speaker 1: year yield higher by one point eight basis points, tenure
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  Speaker 1: yield four point zero six percent up higher by two
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  Speaker 1: point two basis points. What do you see in terms
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  Speaker 1: of the direction of yields Because a lot of people
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  Speaker 1: were saying that this revision would be would unlock the
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  Speaker 1: trajectory for yields for the rest of the year.
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  Speaker 2: Was that asking too much imports on it? Yeah?
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  Speaker 4: I think so, I don't see that. You know, ultimately,
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  Speaker 4: the market's trying to be forward looking, right, and these
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  Speaker 4: these are revisions to pass data not and don't necessarily
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  Speaker 4: reflect how the economy is going to do over the
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  Speaker 4: next three to twelve months, right, And and that's but
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  Speaker 4: but it does show the trend, and I think that
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  Speaker 4: that's important, and that trend maybe is a little bit
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  Speaker 4: more severe than we thought. So that's where I think
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  Speaker 4: a twenty five basis point move is kind of your
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  Speaker 4: base case. And then and then you know how what's
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  Speaker 4: the follow on from that? Uh, that base case for
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  Speaker 4: the long end of the curve. And you know, I
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  Speaker 4: think that we are a little bit overbought. You know,
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  Speaker 4: we we have rallied very far, very quickly, so it
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  Speaker 4: wouldn't surprise me if we can solidate it a little
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  Speaker 4: bit here. I think, Tom, you asked if we were
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  Speaker 4: going to see sub four percent. Yeah, you know, we've
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  Speaker 4: had We've had this since February. We've had our forecast
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  Speaker 4: for year end has been three point ninety five percent
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  Speaker 4: or thereabouts on the ten year field. So we're effectively there.
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  Speaker 3: Special edition and extended edition, I should say, a bloom
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  Speaker 3: Surveillance Scarlett Foo and Paul Sweeney and Bloomberg Intelligence will
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  Speaker 3: pick that up at near a quarter after the hour,
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  Speaker 3: right now, Scarlet fuh in time key for you and
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  Speaker 3: without commercial interruption across the nation efforting a number of
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  Speaker 3: voices here will stay with Ira Jersey and move on
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  Speaker 3: to other conversations. In a moment, I'm going to ask
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  Speaker 3: you and all our guests this question. Is a simplistic
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  Speaker 3: way to look at this is to take nine to
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  Speaker 3: eleven and divide up by twelve, and we take seventy
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  Speaker 3: six thousand jobs off non farm payrolls looking back twelve months.
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  Speaker 4: Yeah, that's basically what you do. I mean, obviously it's
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  Speaker 4: not going to be as linear as that, but sure, effectively,
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  Speaker 4: what you're saying is seventy five thousand dollars seventy five
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  Speaker 4: thousand less jobs per month were created, and that doesn't
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  Speaker 4: paint a rosy picture for the economy at the moment. So,
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  Speaker 4: you know, now some people are suggesting that perhaps this
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  Speaker 4: is the low and that will wind up seeing some hiring.
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  Speaker 4: Not as convinced of that. When you look at you know,
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  Speaker 4: the NFIB survey and a lot of the other sentiment
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  Speaker 4: surveys around the corporate world, it does seem that people
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  Speaker 4: are kind of pausing their hiring plans. So if you,
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  Speaker 4: you know, if no one's being hired and you have
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  Speaker 4: still have layoffs, then the hurdle to get positive payroll
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  Speaker 4: growth is that's even that much higher.
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  Speaker 3: Ira, Thank you so much, Ira Jersey with Bloomberg Intelligence.
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  Speaker 3: I stopped by Michael McKee's desk this morning. I had
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  Speaker 3: to fight through his people got through, and I said
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  Speaker 3: to him, is there a whisper number on preliminary benchmark
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  Speaker 3: payroll revision joining us. Now, Michael McKee, you said there
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  Speaker 3: was no whisper number. There's no whisper I'm surprised by
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  Speaker 3: negative nine to eleven. That's a lot of jobs.
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  Speaker 5: I think we're surprised by the amount, but the fact
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  Speaker 5: that it was going to be a big number wasn't
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  Speaker 5: a surprise to most people. The range in the Bloomberg
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  Speaker 5: survey was from two hundred thousand to nine hundred thousand,
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  Speaker 5: and there were people who were even suggesting a million,
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  Speaker 5: and so that's not a surprise. But remember what you
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  Speaker 5: have to do is take this go back to March.
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  Speaker 5: One hundred fifty nine million, two hundred and fifty thousand
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  Speaker 5: jobs were what the BLS had counted on payrolls as
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  Speaker 5: of March of this year. Now you subtract nine hundred
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  Speaker 5: and eleven thousand from that in March, and that's where
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  Speaker 5: you are. So this is really backward looking data. It's
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  Speaker 5: it's a way to update the data with actual data
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  Speaker 5: rather than a survey. And it does show that the
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  Speaker 5: economy was weaker than we thought, but it doesn't have
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  Speaker 5: a lot of implications going forward.
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  Speaker 1: Okay, I'm going to ask a really obvious question. For
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  Speaker 1: people who don't watch or listen.
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  Speaker 2: Watching, I'm competing with you on that.
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  Speaker 1: But for folks who don't monitor every single job support
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  Speaker 1: or every weekly jobless claims, people like that, well maybe
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  Speaker 1: those who don't listen to Bloomberg Radio, but you know,
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  Speaker 1: for my mother who might tune in, how come the
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  Speaker 1: government can't get it right the first time around? Why
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  Speaker 1: would there be such a large revision, negative nine hundred
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  Speaker 1: eleven thousand jobs over a twelve month period.
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  Speaker 5: Well, the sign of the revision is maybe a bit
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  Speaker 5: of a surprise, but the fact that they are revised,
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  Speaker 5: that happens every year, and it's hundreds of thousands in
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  Speaker 5: either direction. Because what the BLS does is take a
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  Speaker 5: survey every year or every month. They survey one hundred
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  Speaker 5: and sixty one thousand establishments around the country, which is
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  Speaker 5: about they say they account for about thirty three percent
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  Speaker 5: of all payrolls temple. And this is the once a
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  Speaker 5: year data that they use when they get it in
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  Speaker 5: unemployment insurance taxes paid by companies, so they can see
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  Speaker 5: how many people actually are on payrolls, and that is
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  Speaker 5: about ninety eight percent of all jobs. So this is
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  Speaker 5: a much more accurate thing, but the numbers don't come
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  Speaker 5: out at the same time. The surveys the best they
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  Speaker 5: can do. In the meantime, NERD.
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  Speaker 3: Fast and Extended edition of Bloomberg Surveillant Scarlett Foh and
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  Speaker 3: time Key with you. Bloomberg Intelligence coming up here in
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  Speaker 3: eight or nine. I mean, it's Stephanie. We're authentic. We'll
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  Speaker 3: get to her in a moment. Going to ask Stephanie
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  Speaker 3: this question because that would be rude, So I'll ask
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  Speaker 3: you the rude of question. The President is going to
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  Speaker 3: respond to this, Does he say these were Biden jobs
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  Speaker 3: that were lost?
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  Speaker 5: Well, one would assume politically that would be the move
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  Speaker 5: for him, but there has been some sort of feeling
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  Speaker 5: that out there that what he's going to do is
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  Speaker 5: use this to attack BLS because he's already started that
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  Speaker 5: and say how could you be that wrong? And we
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  Speaker 5: need to basically fire y'all and start over again or
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  Speaker 5: something like that. So we're waiting to see how he responds,
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  Speaker 5: but don't know yet.
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  Speaker 3: Malcael McKee, thank if someone stoving all of our economic
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  Speaker 3: coverage truly knowledgeable on these arcane economic moments joining us
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  Speaker 3: now Stephanie Roth kind enough to be with us in
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  Speaker 3: the last forty eight hours, chief economist at Wolf Researched. Stephanie,
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  Speaker 3: I guess it's a surprise to a worser number from
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  Speaker 3: this preliminary statistic to the actual statistic. Can there be
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  Speaker 3: more mystery?
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  Speaker 6: Yeah? I mean the thing is last year there was
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  Speaker 6: a bigger initial preliminary than the actual, so eighteen versus
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  Speaker 6: the actual of five to eighty nine. So I think
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  Speaker 6: markets are just recognizing that we knew that there was
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  Speaker 6: going to be a large revision and it might not
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  Speaker 6: be ultimately as large when we get the actual in
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  Speaker 6: early twenty twenty six.
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  Speaker 1: Stephanie, what would you be listening for, watching for when
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  Speaker 1: the president does eventually respond. As we've been noting, the
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  Speaker 1: period covers the end of the Biden administration and the
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  Speaker 1: very beginning of the Trump administration, and the President will
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  Speaker 1: be quick to say that it is all Joe Biden's fault.
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  Speaker 6: Yeah, I mean, I think that's probably right, and perhaps,
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  Speaker 6: as Mike McKee was saying earlier, it's perhaps more of
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  Speaker 6: just an attack on BLS and not getting the numbers right. Granted,
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  Speaker 6: this is a really difficult thing to estimate. In real
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  Speaker 6: time and BLS does their best buy having a survey
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  Speaker 6: that doesn't represent the full sample. So once they incorporate
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  Speaker 6: all the data from the unemployment insurance records, then they
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  Speaker 6: can get the full picture. And it's not always exactly right,
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  Speaker 6: but what we have seen is the preliminary is larger,
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  Speaker 6: shows a large revision in recent years in the actual.
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  Speaker 3: Sephonie wrongs with us and we will continue with ms
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  Speaker 3: Roth of Wolf Research News. Intrudes oil is surged up
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  Speaker 3: one dollar, up one point five percent on Brent crude,
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  Speaker 3: sixty six point five eight on Brent crude gold elevated
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  Speaker 3: fifteen dollars. Our top Live team, thank you Paul Wallace
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  Speaker 3: for your leadership in the Middle East. Israel strike and cutter.
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  Speaker 3: This attack and cutter is unprecedented. It's difficult to overstate
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  Speaker 3: how angry it could make the leadership in Doha as
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  Speaker 3: well as other Gulf states such as Saudi Arabia and
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  Speaker 3: the UAE. And to go over to the headlines, this
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  Speaker 3: is just breaking now in terms of actual headlines and
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  Speaker 3: not speculation. And the headline is simply Israel targets Amas
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  Speaker 3: leadership in strikes on Katari capital. That from our Paul
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  Speaker 3: Wallace and Alisa Odenheimer as well. Scarlett Foo was Stephanie Roth.
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  Speaker 2: So let's follow up on that headline.
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  Speaker 1: With oil prices now rising and you see WTI, for instance,
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  Speaker 1: up one and a half percent, Brent crued up one
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  Speaker 1: and a half percent as well, we're talking about approaching
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  Speaker 1: a high sixty dollars range at some point.
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  Speaker 2: What does that mean for the inflation picture, Stephanie.
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  Speaker 1: We get CPI and PPI this week and all focus
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  Speaker 1: will be on that. But down the road, if this
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  Speaker 1: war has revived and this becomes a constant pressure point,
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  Speaker 1: how are you folding that into your analysis of inflation?
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  Speaker 6: Yeah, I mean there does continue to be more inflation
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  Speaker 6: pressures than generally expected. So oil prices tend to look
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  Speaker 6: at a little bit differently, and that's why the said
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  Speaker 6: looks at core, which excludes good and energy. But when
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  Speaker 6: we're thinking about the broadways inflation picture, we are worried
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  Speaker 6: that inflation pressures are going to pick up in the
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  Speaker 6: next couple months because by our estimates, we only we
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  Speaker 6: see about thirty five to forty percent of the tear
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  Speaker 6: of pastor has already happened, in which case a lot
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  Speaker 6: of it is ahead of US, and it might just
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  Speaker 6: look like a number of prints where core inflation is
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  Speaker 6: running in AO point three towo point three five percent range,
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  Speaker 6: which just poses a challenge. So the energy pricesdent and
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  Speaker 6: of itself means it's a little bit less important, but
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  Speaker 6: the broad inflation picture is a bit challenge in the
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  Speaker 6: next couple of months.
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  Speaker 3: Stephanie, thank you so much.