>> a very different environment where the bed is trying to get to neutral much more quickly. >> the fed want to stop being a source of volatility. >> how aggressive the central banks are expected to be over the next year. >> look across the globe, global forecast for growth are being revised down. >> it is clear that things are way out of control. >> this is bloomberg surveillance with tom keene jonathan ferro, and lisa abramowicz. tom: a fed day on radio and

television. we continue our coverage. paul romer, dealing with technology in this most unusual cycle. jonathan: what a difficult time for them. some might argue they got themselves into it. this is what we are looking forward to today, a 50 basis point move. from there, things get more complex. that is why people think today it will be difficult for the fed to outhawk expectations, because expectations are very frontloaded right now. what could be interesting about the market is any assessment of the future. tom: moments ago, talking about yes it is a store but also uneventful. i'm not so sure. the last time i was humbled, a lot went on. jonathan: a lot of people want to know the answer to the 75 basis point meeting for the next

few meetings. i'm not suggesting he will do that, but how he answers that, a lot of people will look for the hints that lie in it about what it could mean for the future path. tom: you mentioned it earlier, lisa, what a different economy. it is a superheated labor economy. lisa: i cannot get over the fact, nearly two job openings for every unemployed american. that is not going down, that ratio. it should be concerning to the fed. how do they view their need to get to a 2.5% inflation rate? it does seem like they have to go faster in order to get back quickly. does it matter to them to do that? tom: to open up the conversation, instead of the 3.5 surveyed on employment rate, do we need to model a two .9% jobless rate? lisa: what does that mean if you

don't get participation rate backup? do we really understand the dynamics of the market? if it is overheated, and you were mentioning this, what do we have to do to get it back to a place that is more comfortable? tom: what does the financial system do with a fully employed two .9% america? jonathan: typically, went unemployed and starts going higher, things get bad. you don't get a pickup in unemployment when things turn out ok. 3.5 is the survey for friday. 3.5 year and 3.75 year. 3.6% year and 2024. a lot of people think that is fancy land. that is what people are focused on. if you think there are imbalances in this labor market that are generating cost

pressures, risking a wage price spiral, whatever that means, if you want to rebalance that labor market, can you do that without causing a recession? that is where the soft landing, hard landing debate comes into it. tom: jon just nailed that analysis. futures up 17. vix well under 30. lisa: i knew that was going to come. jonathan: futures up .4%. yields are down two basis points. i am done for the next 20 minutes. tom: here is what we are going to do. we will recalibrate with the strategy is for investment given this fed day. we will do this with megan horneman with verdence capital advisors.

they actually manage money. good morning. 60/40 seems so dated. selected parts of my equity market are getting hammered. am i hiding under the desk? megan: i think what you need to do is, first of all, having dry powder coming into the year was extremely important. while we have seen the 60/40 completely deteriorate this year, there are ways to readjust your portfolio. you have to have alternatives in the portfolio, whether that is real assets on the private side if you are a qualified investor -- they will help your portfolio -- but also be willing to make adjustments within that 60% equity exposure. look at those areas that have priced in the worst case scenario. tom: what is your team telling the people enjoying the great flood price down in bonds?

these numbers are amazing, whether it is full of faith and credit, high yield, it is priced down. have they ever experienced a bond bear market like this? megan: be a silly, this is one of the worst bear markets in bonds that we have seen since the 1980's. but we have been doing is very short duration, defensive. we have been very careful with the credit space, starting to see weakness there, so not a lot of exposure in high yield. very little if any in investment grade. not to say they will not be opportunities in those areas, but right now, they are still in the midst of repricing this whole interest-rate environment. lisa: you started the year with liquid assets to try to deploy particularly when you see opportunities. is this a buying opportunity? it sounds like not yet in the riskier credit spheres. what are you looking at to determine that? megan: not in fixed income,

i agree. stay short when it comes to credit. we are looking at investment-grade, high yield is not cheap enough yet. we have seen this massive repricing in fixed income. at the end of last year, $14 trillion in negative yielding to, now only t around the world -- two around the world. there are areas of the global equity market that have priced and what we think is the worst case scenario. when you look at things like small-cap, mid-cap stocks in the u.s., down 20, 30%. these areas show if you have the ability to look through the volatility, these will be good for the long run. international stocks, similar situation. you have to stomach the volatility this year, but long-term, it will be a good opportunity. lisa: what about the u.s. versus europe?

peter oppenheimer likes some european banks. do you agree? megan: we do like european equities, not just from the banking perspective. european economies are much bigger exporters than we are. right now that is what the world needs. we are still working through a global supply chain collapse. these european companies are much more export driven. they should help benefit as we continue to clear that out. jonathan: thank you for joining us, megan horneman, verdence capital advisors. what did the joke used to be? the way to be a millionaire, start as a billionaire and buy an airline. some of the numbers in europe have been rough. tom: it is shocking to see it. mr. dimon mentioned it on a relative basis, even more shocking.

you mentioned it earlier, brent crude, 109.49. just rounded up to 110 if you want to be aggressive. this diesel story, maybe powell brings it up. american diesel, 5.08, 5.43. it is nothing compared to europe. jonathan: i got some from the criticism of the other day and they were so right to quote me on this. stop quoting crude, this is not what people consume. let's talk about diesel, the average gas price in america is still elevated. that is where the pain is for so many people. tom: stephen short's analysis, 80% of his memos is distal it. i don't understand the

chemistry, but the idea that diesel is a foundation and bedrock, i would also point out more efficient than gasoline. diesel is way under discussed in the media, where it is front and center now with the pros. jonathan: daily national average gasoline prices, $4.27. lisa: and it is back on the rise. it had come down a little bit and is now going up. it is meaningful if you are going to the gas station and that cost $100 to fill up your tank. how much does this color the view of inflation? this is something typically transient. people usually pass this, this is volatile. but is it volatile on the way up for how tight supplies are? how does that reset how we value energy as a component of inflation? tom: the micro data may slip out today from chairman powell. one way that it may is a

discussion of cpi, the deflator. times in previous meetings where he goes to the dallas trim inflation statistic. maybe he will use cleveland. how do those inflation numbers come back when you have hydrocarbons doing what they are doing? we have not even talked about rent. jonathan: we are going to be data-dependent. and then someone will ask, haven't you ignore the data over the last nine months? tom: we may get a snooze fast, but i'm trying to sell this thing at 1:00. lisa: you don't feel it? jonathan: the show or the news conference? i hope the show is enough. tom: we could have had it all. shares are going to fall if it is a snooze fest. jonathan: this is bloomberg. ♪

ritika: keeping you up to date with news from around the world, i'm ritika gupta. jerome powell is poised to police the central bank's most aggressive action to battle inflation. investors will be listening to what he says see if even bigger moves are head. policymakers are expected to raise interest rates by half a percentage point. it would be the largest rate hike in more than two decades. the european union is proposing to ban russian crude oil over the next six months payment ursula von der leyen also said refined russian fuels would be banned by the end of the year. hungary and slovakia will not have to enforce the ban until the end of 2023. both were opposed to a quick cut off a russian oil. in ohio, a candidate backed by donald trump as one the primary for a senate seat. j.d. vance, who once described

the prime minister as unfit, is now accepting the endorsement. uber delivered an upbeat outlook in earnings. uber plans to focus on product changes rather than incentives to deal with the driver shortage. all of that contrasted with its rival lyft which reported a disappointing outlook on tuesday. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. m ritika gupta. this is bloomberg.

jonathan: data in the united states of america, the preamble

to the payrolls report, the appetizer, the adp report. mike mckee will break it down. mike: a bit of a downside surprise, surprise and given what we have seen from the recent months. only 247,000 jobs is what they think were added to private sector payrolls during the month of april. the audit note, small businesses they say lost 120,000 jobs .let's get to first word news. . large businesses edit 321,000. combined with medium you get that 247. 120,000 small business jobs went away, an interesting statistic. leisure and hospitality, 77,000 jobs added. manufacturing, 25,000 jobs added. this is adp, so it comes with the caveat that it doesn't track the april nonfarm payrolls very

well, but it gets traded. jonathan: citi said a shrinking pool of available workers should soon limit the pace of available job growth. what did you make of that line? mike: i think that is probably true. we seem to be reaching the end of the available worker, unless we get a lot of people coming back into the labor force. we have had some but does it continue? 11.5 million open jobs yesterday. that keeps getting bigger. i'm not sure why we lost 120,000, on those people went from small companies to big companies because they will get paid more. tom: there are a lot of moving parts. what is the key moving part that would drive us to 2.9%

unemployment rate? mike: it would be a lack of workers, i think, more than the fact that people get jobs. that is implied by the unemployment rate. if the participation rate continues to be where it is, you'll see the unemployment rate go down. there are people that had forecast 3%. jim bullard thinks we could get there by the end of the year. it is certainly possible. lisa: when you talk about the inability to hire workers, how do we gauge that versus companies choosing not to hire because the cost is too high given how much wages have increased? mike: that will be an interesting tipping point, something the fed will have to worry about as it raises interest rates. that will tell us about how interest rates are impacting business spending. right now, there doesn't seem to be a sign that companies are pulling back for that reason. they seem to be willing to raise

prices to keep it up. if american start to say we will not pay these higher prices, martin start to get impacted, then maybe we will see things slow down. lisa: why do people trade on the adp? mike: it's a question that everyone asks about probably because there is nothing else to trade on today. you could trade on the fed today, but the fed does not meet every month on the adp days. most days there is not much else to trade on. it does gave economists one more data point to fold into their forecasts. people have learned that you get burned pretty quickly with adp sometimes. jonathan: thank you as always. traders going to trade. this just came out from slovakia. they are asking the eu for a three-year exemption to the import ban on russian crude. important to go over this, the

german dependency on russian crude has gone from a third to about 12%. one third of their crude imports are coming from russia. slovakia is in the 90's. tom: all i know is that the russian bond of 2042 is price up, yields down. dollar-ruble is stunning. 66, down from the 80 level. jonathan: the money that slovakia has to spend as they work through this, who knows if they will get the exemption. they say they have to adjust the refinery for light crude oil, and that would cost a few hundred million euros. they also need investments to adjust the pipelines to reverse the flow from west to east. of course, none of this is simple, but there are different countries across europe. i mentioned 12% number four germany, 90's in slovakia.

hi as well in hungary. for other countries come it will be a bigger thing to shoulder compared to the germans. tom: we will watch the recent quiet in the more news as well. chart of the day with kriti gupta. kriti: as we talk about this fomc decision, we have to talk about and only second long trend coming to an end, negative yielding to. all main -100 yielding bonds in the world, mostly in europe. you can say a steep drop starting your to date, everything to do with an extremely hawkish federal reserve. a lot of that negative yielding that still left in europe. the question is if you see that policy diversion between the fed, ecb, other central banks around the world, how much longer does this go? the other ball case for bonds could reverse this trend is the growth scare, china scare, ecb

scare coming off of the war in ukraine. bill negative dots extent as it was eight years ago? tom: i am just looking at my bond portfolio. jonathan: how is that working out? tom: down 50% on that austrian peace -- piece. jonathan: this is painful. tom: 60% annualized. jonathan: one thing that stands out to me, the german two-year. this is quite the move that we have gone from positive 28 basis points from negative one full percentage point in the pandemic. that is a massive change. the ecb has been largely left out of the conversation, but think about what's happening. last really a raising interest rates -- australia raising

interest rates, the whole world is raising interest rates. that june meeting for the ecb will be huge. lisa: they cannot just say that they will stay the course, they cannot say that they will not raise rates. the euro is definitely depreciating to a point where it is getting their attention. they are dealing with an economy that is not just energy. energy is the driving force, but the recent inflation data shows it is elsewhere. jonathan: i say everyone is raising interest rates, but that's not true. the bank of japan wants nothing to do with this. tom: if i am christine lagarde this afternoon, i will focus not on euro-yen but on dollar-yen. 118 to 130. that is a weak yen. maybe that is a litmus paper to follow. jonathan: coming up, a

conversation you don't want to miss. paul romer, the nyu professor and nobel laureate. this is bloomberg. ♪

jonathan: your day ahead looks a little something like this. 2:00 eastern time, a federal reserve rate decision. shortly after, you'll hear from the president of the united states. then you'll hear from the chairman at 2:30. your 10-year, 2.96. crude higher at 106.29. tom: we have the laureate from new york university. paul romer joins us. from day one, the gentleman from colorado has done academics at rochester and beyond where he has always considered technology.

thank you for joining. i want to go back to the heart of it. and dodging us technological change. do we understand what technology is doing to the american labor economy, two people in our many deciles? paul: there's a good way to see if some of the problems we are experiencing in the u.s. are technology-based. look at other countries. same technology shots are hitting other countries. what is unfortunate is the u.s. stands out as an outlier with a declining fraction of adult males and females who are working. all the other countries are seeing steady increases. it cannot be technology which is explained this decline in the u.s. tom: jeffrey sachs would agree with you. his book got out in front of this, from a different angle. two different views on a part of america that cannot get a job.

why can't they? paul: i think can't get a job is not quite right. we have all this evidence that jobs are available. right now the returns to work, the compensation you get, the quality of the work is not high enough. we have let this tear you through a couple of decades now. what we have to commit to is that everyone should be working, but if you work, you should earn enough to make it work your trouble. these increases we are seeing, gas station attendant, 25% increase, that is catching up for declines that we tolerated for much too long. we should be pushing for more increases in wages, more attractiveness of work. we cannot live in a society where people just check out, especially adults, and don't work. lisa: the participation rate has not gotten back to pre-pandemic. still, you are talking about the

need for even faster wage increases at a time when people are concerned about the highest levels of consumer price inflation going back to 1981. how much do you think the flood of money put into the economy during the pandemic, the checks sent to individuals, actually undermined the ability to engage in fiscal stimulus to get more people into the workforce? paul: you have to think about targeting fiscal stimulus. what would be a target and measure? we could have a subsidy for wages at the bottom end of the weight is to view should. the government could pick up part of the cost. or we could be like other countries, we don't make the worker or the firm cover the full cost of health insurance for the worker. there are ways to make it more attractive that don't involve just sending checks to everyone. if you think about inflation, it is a weighted average of a bunch of price changes. the wrong spots would be, we

want to make those gas station attendant have a lower wage, stop them from getting increases. there are a lot of other places in the economy where we could be putting pressure on without hammering the low-wage workers that have been hammered for two decades. lisa: there is the should and the will. we know that president biden will talk today about deficit reduction to appeal to voters who are concerned about how much the debt has increased in this nation. what do you think will happen, if the fiscal stimulus you are talking about is unlikely, given how inflation is being targeted right now? paul: let me be honest. especially in the realm of politics, i've been telling everyone for about four years now, add more variance to your estimates. we have seen more astonishing, unexpected things in the last four years than in the rest of

my lifetime. i will not make any strong predictions about what will happen in the politics. all i can tell you is what i think should happen. we should make work attractive for everyone. tom: i love how the nobel laureate folks is telling us there have been four once-in-a-lifetime events in the last few years. i want to go to the heart of the matter. did all of this wage challenge, disincentive start with executive bonuses? the way that executives are compensated? well-meaning executives look at it as, if they give a wage growth to the lower deciles of staff and labor, they are taking dollars from their bonus? paul: to be honest, i think economists contributed to this. we argued -- i was one of them -- if we made the compensation

for executives more variable, they would have stronger incentives to do their job well. but more variable got translated to just higher payments across the board. we provided cover for this change in norms. at the same time, we didn't pay enough attention to the serious lagging affects we were seeing in the rest of the economy. there were many beneficial effects from opening up to free-trade, but we understood at the time that one of the harmful effects would be, people will lose jobs in manufacturing. we always said you could do something to help those workers so everyone benefits, but the problem is we didn't do that something, so they suffered. tom: one of the things we have to say -- professor roemer is truly expert at monetary policy. if you are having a cup of coffee with the chair of the federal reserve and he is saying

tell me about technology, labor, the dynamics of the american economy, should he care about that or does he need to stay riveted on the fed mandate, the purity of what a central bank does? paul: i think i would tell him to stay focused on his mandate, which is to watch inflation. if you think about what was most damaging at the end of the 1970's, it was a sense of living in a world where things were out of control. one volcker reestablished for us, there was somebody in control and would bring inflation down. the job of the fed right now is that they show they can bring inflation down both technically and politically, and they have the room to do that. he needs to reassure people and give them confidence. we need to not let congress and the executive branch off the hook on the rest of economic policy. it is their job to think hard about what we do to make work and economic life attractive to

everyone. lisa: the other question is what we will do to get down to a 2% inflation rate in the near-term, how this will decide how quickly they have to go. do you think they should target a higher rate of 3% or more? paul: i am persuaded by that argument. some might argue for percent for a while. either of those numbers would be fine. the argument you here against that, if it is 3% or 4%, it could also be eight, 9%. we could target a stable 4% inflation rate if we wanted to, or a stable 2%. i think we would be better off at a stable 3%, maybe 4%. tom: you lived the colorado boom. all i did was have beers in boulder.

you lived the colorado boom. i cannot say enough about that. there is a part of america, like in ohio, screaming that they want their colorado boom. how do we move the colorado boom to ohio without the coors beer? paul: one thing we are not paying enough attention to, the jobs can come to the workers, but the workers ought to be able to go to the jobs. cross state mobility has gone down partly because we have put restrictions on the supply of new housing. housing has gotten so expensive in places that have these hot labor markets. this is not something you turn around in a quarter or a year, but we should be trying to increase the mobility of labor. also recognize a point that i've been hammering for a while.

the future is in cities. we cannot be talking about how we bring manufacturing and all of his other economic activity to small, rural towns. it's not going to happen. we have to make room in cities for everyone who wants to move there and get a job. jonathan: fantastic listening to you. paul romer of nyu. what is cors 323 like? tom: it is a fine beverage. one of the reasons i fell in love with english beer, it has body. jonathan: taste like beer. tom: i remember having a french beer for the first time and it was like, oh. jonathan: he said 4% is good enough for them. can you imagine if they signaled they are ok with 4% inflation? lisa: if the fed brings down inflation to a stable 4%, perhaps that would be enough. it speaks to the idea that

perhaps getting back to 2.5% in the near term shouldn't even be on the radar of the fed, they should just be looking for downward trajectory. a radical idea after decades of talking about a 2% inflation target. jonathan: a viewer rights in, tom never ceases to amaze me about his knowledge of pubs. later, we will catch up with bob michele. [indiscernible] stanley blanchflower of dartmouth. scott minerd. tom: we are doing a remote from the embassy. jonathan: from new york, this is bloomberg. ♪ ritika: keeping you up to date with news from around the world, i'm ritika gupta.

let's get to first word news. the fed set to unleash its biggest interest rate hike in more than two decades. policymakers are expected to wrap up their meeting today by agreeing on a half percentage point increase. they are also likely to announce plans to shrink a nearly $9 trillion balance sheet. russia is focused on cementing military and political control over the ukrainian. has controlled so far. they are ordering locals to use rubles for transactions. there will also be referendums in the areas to open the way for full annexation. a study from the u.k. says severe covid may cause long-lasting effects equivalent to losing 10 iq points. patients showed slower and less accurate responses. it shows how much brainpower 70-year-olds have lost compared to those aged 50.

last year, bill hwang was arrested, and it may just be the start. an investigation into questionable trading practices are on the rise. it all focuses on the same question, are the markets rigged? cvs raises its outlook for the year and posts first quarter results that beat estimates. pharmacy benefits reported revenue of almost 9% higher than a year ago. sales at the health insurance business were up 13%. global news 24 hours a day, on-air, and on bloomberg quicktake, powered by more than 2700 journalists and analysts in more than 120 countries. i'm ritika gupta. this is bloomberg. i'm ritika gupta. this is bloomberg.

>> i am not a betting man.

yes, they can engineer a soft landing, a third of a percent chance. you could enter into a milder recession. then there is a chance it could be harder than that. tom: jamie dimon talking about the larger picture of the american economy. we will stagger to the fed meeting this afternoon. i love what peter said about it, historic but uneventful. maybe. lisa: there could be some surprises. tom: we are doing this as we introduce barbara corcoran, who we like to talk to once or twice a year. she is a dynamo of the five boroughs. i don't want to make a joke about this. people magazine doesn't absolutely killer issue every year on women across all of entertainment, across all of enterprise and capitalism. barbara, they have selected you

as a beautiful person. we were talking about adele earlier in the show, i don't want you to sing like adele, but we can talk about your wheelhouse, real estate. we have never seen rent and housing in the city the disaster it is today. how do we extricate ourselves from this train wreck of real estate pricing? barbara: well, it's not a total train wreck. it depends on whose viewpoint you have. if you are a buyer, you are complaining you cannot possibly afford interest rates going from 2.5% to 5.3. everything is less affordable. it's a train wreck from a buyers point of view. the interesting thing is buyers are not slowing down, people are still grabbing real estate as if nothing is happening. that is making people nervous. it does not make me nervous. i see that the under footings of the market are solid.

real users buying real homes that are highly leveraged, are not loaned out to crazy configurations. tom: if i look at the corcoran group, which you built from scratch, if i look at the fancy downtown areas, the number one fear is we don't want to make new york city look like an eastern german city. we don't want row after row of high-rises. how do we create housing that mayor adams wants without making it look like a city in eastern europe? barbara: the reality is we are not putting affordable housing next to $50 million condos, it's not going to happen. whether you like the concept of some poor neighborhoods or richer neighborhoods, that dye has been cast in new york for a long time. the problem really is that in the city, our supply is a third

of what we actually need. i think goes public work programs will happen. i don't think they will happen in the part of town that people want to impress their friends with. lisa: you talk about how the footings of this market are incredibly solid. people are not leveraging their purchases. are you saying the housing market of 2022 is more immune to the rising interest rates that people are hoping will dampen some of the price increases we have seen on homes? barbara: i'm not saying it is totally immune, but it is better equipped to handle it, simply because you don't have leverage buying. in the sunbelt right now, one in eight homes are being purchased by investors. that worries me. you didn't see that two years ago. that is a buyer that i'm not as confident in as someone who will raise their kids in the house. the people buying homes today are not highly leveraged, and

there are no bank programs that attempt for them to be leveraged out. that gives me peace of mind. interest rates is a partner in housing market. if those continue to shoot up, the government will put down the housing market, with it inflation, and all the probable follow the housing market. the leader in the inflation category. if people are irresponsible in that regard, the government could demolish the housing market, but no one is expecting them to act this way. lisa: what would you be investing right now if you had $2 million? barbara: when i'm investing in is secondary cities. it used to be like primary cities like new york and chicago where the best ways to invest. what i'm doing right now is investing in minor cities, secondary cities. baltimore.

many small cities in the midwest. the inflation rates are greatest there in real estate values. tom: like chicago or los angeles, secondary city? barbara: i was grasping for words. tom: so many people want to know, if high spouses go up 40%, should people's property taxes go up 40%? barbara: no, i don't think so. it would break the back of the housing market. people cannot take it on both sides. tom: thank you for joining us. the corcoran group featured in people magazine. you know her from "shark tank." we have a busy day. i think the surveillance nap is out the window. i am not going to nap through the press conference. what happens on surveillance stays on surveillance. lisa: one thing that we didn't

mention today, came out a couple minutes ago. the treasury reduce the amount of borrowing it expects to do over the next quarter. this is why so what. when people are worried about buying less of the debt issued by the u.s., the u.s. is selling less debt. they cut those sales even more than people were expecting. in other words, if you are looking at the supply-demand dynamic, right now, you see that it is not as out of whack as it seems. could this be supported for yields? dead silence. he is taking his nap. tom: when is the next option -- auction? lisa: i will find out. i know you are already asleep. tom: this afternoon, we have put together a fabulous team.

we have hit it out of the park. the red sox beating the angels last night. the first win in may. seriously, a great list. that was already starting us off is a big deal. lisa: they have been pretty aggressive in terms of how fast they think the fed should go. two yields have taken another leg higher throughout the morning session. at session highs of 2.82%, the highest levels going back to 2018. is this fully pricing how hawkish the fed will be? how do they respond to a 75 basis point rate hike in june? tom: the two year yield is up more than the 10-year yield. four basis points on the 2s/10s. stay with those on radio and television as we move through the morning. we will begin on this historic

day with chairman powell and the fed. we begin at 1:00 p.m. stay with us. we didn't mention down futures the entire show. up 70 points. this is bloomberg. ♪

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>> good morning. peter is science right now.

-- quite -- >> this is bloomberg open with jonathan ferro. jonathan: we begin with counting down with chairman powell. >> it is 2:30. >> he will lay out the path and trajectory. >> rate hikes over the next four meetings. >> a foregone conclusion. >> a key priority for them is to get their policy wait up to neutral. >> they will leave all the options on the table.