Markets react to jobs data, Priceline CEO on travel: Catalysts

On today's episode of Catalysts, Hosts Seana Smith and Madison Mills break down some of the biggest stories from the trading day.

September's jobs report came in better than expected, as the US added 254,000 jobs while the unemployment rate ticked down to 4.1%. Leslie Falconio, UBS Global Wealth Management head of taxable fixed income strategy, believes the print shows the market that the Fed's 50-basis-point cut in September "is not a trend." She adds, "The market is now readjusting to a less dovish outlook, which we believe they should have to begin with. So we're not surprised that they're taking those cuts out." However, she notes the next jobs report could be "clouded" for the Fed as Hurricane Helene and labor strikes may weigh on the data.

Federal Reserve Bank of Chicago President Austan Goolsbee calls the report "superb" but cautioned that people may not want to get too excited about it. "Don't get too worked up about any one month's report. Remember, it's plus or minus 130,000 jobs, just the margin of error. So the last two months when the numbers were disappointing and people began to freak out, I said, let's not overreact to one month's number. This is a very good number. And we got revisions on some of the previous months," he says.

Gary Cohn, the IBM vice chairman, and former US National Economic Council director in the Trump administration, tells Yahoo Finance, “I always remind people when we get the jobs report, this is probably the least scientific data that the US government puts out. This is actually polling data. They call people's houses and that's how they come up with this information. And that's why we see relatively big revisions to employment data month over month. So I always say always take these reports with a grain of salt. But the trend is important… We're at a good, really neutral place where the jobs are being created and the people entering the workforce. They're balancing each other out, which is a which is a good place to be. So we're seeing a real normalization of what I would call the US economy.”

Wage growth ticked up 4% year-over-year in September, and Priceline (BKNG) CEO Brett Keller explains, "More money means more travel." He notes that the travel industry held up well through the summer, and with the holiday travel season right around the corner, the industry data is showing traffic patterns in line with 2023. Meanwhile, the hotel industry has grown slightly stronger, and he notes that it has normalized since the post-COVID revenge travel cycle.

Constellation Brands (STZ) posted mixed second-quarter results, showing weakness in its wine and spirits segment while maintaining strong demand for beer products. CEO Bill Newlands remains "optimistic that things are going to get better," despite the mixed report. He references the recent jobs report, which showed Hispanic unemployment rising to 5.1% in September, noting the significance as the Hispanic community comprises a major portion of their customer base: "The fortunate part for us with a Hispanic customer is there's great brand loyalty and they view beer as really a fundamental in what they do with their lifestyle, so that's very helpful. But there's no question that if things are tight or there's concerns, that people get a little bit careful and they tend to buy more value packs."

This post was written by Melanie Riehl

Video transcript

Welcome to catalyst.

I'm John Smith alongside Madison Mills.

30 minutes into the trading day.

We've got three catalysts moving the markets here today.

The massive beat in the September jobs for also what ultimately, this tells us about the strength of the consumer and an end to lost drug shortage.

And we bring you full coverage of that September Jobs report and what the data means for the feds path forward will be speaking with Chicago Fed President often will be and former National Economic Council director Gary call later in the hour with the latest read on the labor market says about wages and the health of the consumer will get the sweet insights from the CEO of Priceline and constellation brands coming up.

And as the weight loss drug shortage comes to an end, we look at the winners and losers in the health care space and what comes next for market leaders as they face heavy scrutiny over pricing.

But first, we want to start with the move that we're seeing higher on the back of the September jobs for a massive beat out this morning.

You're looking at the equity markets pushing to the upside but I want to draw attention to the movement actually that we're seeing within the bond market because that really tells a story that move higher in the 10 year yield.

And we're seeing that aggressive repricing, I think of traders right now in terms of their expectations of what the Fed is ultimately going to do next.

So here you have the 10 year yield, the and move to the upside here this morning, just shy of that 4% level.

And if we could put the CME fed fund futures up on the screen too, just in terms of how traders are now expecting or what they are expecting.

In terms of that next move here from the fed, 94% are betting on a 25 basis point cut in November.

That was up from the high sixties percentage yesterday, 72% expecting another 25 basis point cut in December again, a sharp shock pull back being priced into the bond market here as traders do kind of reconfigure some of those expectations moving forward.

Yes, certainly the treasury market getting caught off sides here heading into the print on.

I'm glad you bring that up, but I also want to pull up just the unemployment rate reminding folks that it take up to 4.05%.

So rounded up to 4.1% here, you can see that on your screen, but it was just above 4%.

Take lower than what we were anticipating, heading into the prince.

So what does that tell us moving forward?

Remember, the fed is expecting 4.4% by year end and unemployment, we are far off from that.

So what will that mean about the feds path forward here?

Joining us now to discuss the Falconio, she is the head of taxable fixed income strategy and you be global wealth management, Lesley, it's great to have you on here.

So talk to me about the risk of re inflation here.

Given what we've seen in the jobs print today, did the fed potentially go too far too soon with 50 basis points?

You know, I think, listen, you know, the 50 basis point move given how restrictive the fed fund level is to begin with and how high the fed fund level is.

I wouldn't say they went too far.

It was definitely pre emptive.

But I think what we've seen today in terms of the employment report and now having a three month average of about 186,000, which is up from about 114,000.

The last print just reassures the market that that 50 basis point move on.

The first cut is not a trend.

And I think as you mentioned earlier and this is something that we had expected.

Also, the market is starting to take out those the basis points cuts that they had priced in, you know, for possibly November or December.

Now, as you mentioned, it's about 6% in November.

It found about 17% in December.

So I think the market is now readjusting to a, you know, less dovish outlook, which we believe they should have to begin with.

So we're not surprised that they're taking those cuts out.

But again, and as we know, I mean, we have another report before the fed meets, it's going to be very clouded given the, you know, the hurricane and some of these strikes and you still have that divergence of what claims are showing and the employment report is showing versus things like jolts where the quit rate is very low jobs hard to find are difficult in hiring.

Although there's not a lot of layoffs, there's not a lot of hiring either in the market.

Well, is there a scenario where the fed stops easing, given the fact that the labor market, I I if, if we do get another strong print like today's, you know, I I find that to be very unlikely given the level of where we are.

And I think that when we talk about the recer of inflation, I mean, again, you know, inflation is trending lower.

We, we think that inflation will continue to trend lower.

There's no question that you might have these pockets of vulnerability such as what we're seeing recently in oil.

But the question of sustainability and the actual impact that that will have over increasing long term inflation.

We really don't think that's the case.

I mean, we think that, you know, goods inflation has been coming around coming down for quite some time.

You know, it may, if that port port strike actually lasted longer, that would have been an issue, but that's been resolved.

And now we think when the service, while the service inflation has been sticky over the long term, we do think it comes down.

So you might have these pockets of vulnerability, but we don't think the fed is going to pull back because of a large inflationary acceleration.

And given the level that we're seeing of the real fed fund rate, you know, to continue on that cut will likely be in the past.

But again, it's going to be moderate, it's not going to be a consecutive of 50 basis points.

Let's talk about the neutral rate because I'm interested in what we're seeing in zero coupon inflation swap, showing expectations for inflation over the next 12 months are higher than they've been since July.

So I'm curious is, is something like this telling us that we are underestimating strength in the economy and potentially where the neutral rate might be heading into next year.

Well, listen, finally the neutral rate has gone up.

I mean, if you look at prior to the employment report in the December 2025 Silver contract, you had, you know that contract at about a 287 which isn't far from what the feds projected neutral rate will be our expectation.

We know that neutral is, is difficult.

So, you know, we really don't know what the neutral rate is until you pass it.

But our expectation of neutral is around that, it still remains around that three and a quarter and the market is adjusting up to that.

But to your point, I mean, I think even if you look at the breaking of inflation expectations of a five year tips market, you know, 343, 3.5 weeks ago, that was about a 187.

Now we're at about a 215.

So you are seeing a rise in inflation expectations, but that's two fold.

One, the economy is the the market is removing the expectation of a hard landing, right?

And it's going more to the soft landing two, obviously, the 50 basis point cut had the inflation vigil vigilante is a little bit on concern.

And number three, we've had seen this rise in Brent and wt I which again, we don't think is necessarily going to be a lasting tailwind to rising inflation.

All right, Leslie Falconio.

Always great to get your insight.

Thanks so much for hopping on with us here this morning.

U BS A glo global wealth of management head of taxable fixed income strategy.

Thanks so much job growth picking up during the month of September, easing some concerns about a weakening labor markets.

What is today's data signal for the strength of the consumer in the travel industry at large.

We want to bring in Brett Keller.

He's the CEO of Price Line, but it's great to have you here.

We're starting with the jobs for and, and that take up that we did see in wages just because I would think it would be a bullish sign here for your industry.

Given the fact that consumers may do have a bit more spending power, is that consistent with the data that you're seeing on your platform?

Well, it would certainly help, uh more money means more, more travel.

Uh The industry is held up relatively well through the summer, certainly during the the peaks of summer in mid July as we've come into the shoulder period, now people are starting to think about uh holiday travel.

So Thanksgiving is up next on the roster and largely, you know, looking at industry data for flights, they've been, you know, largely in line with traffic last year, whereas the hotel industry a little bit stronger.

So I would say that the hotel industry has normalized versus really the revenge travel cycle we saw last year where things were really moving, but things are generally healthy right now in the industry, I have to ask you and forgive me, but I can't get over the jobs print from this morning, but a little bit of a markets nerd as we all are over here, I'm just curious how you're thinking about hiring and the impact of rate cuts on spirits hiring moving forward.

Did you consider hiring more off of the 50 basis point cut?

You know, I don't think we react quite that quickly in the industry.

We look at the needs of uh where we're moving in terms of development initiatives and how those initiatives are paying off.

And so we're, we're very careful as we move forward, but we continue to hire a Priceline.

We're bringing, you know, folks on to fill especially very important roles for uh roles in generative A I where we're investing significantly and in other tech efforts, right?

When it comes to some of the trends that you're seeing within the industry, you mentioned the fact that you did have a strong summer that set up then going into the holiday season.

I'm curious what you're seeing spending wise.

We had the news out of spirit today, the potential bankruptcy filing, the fact that they reportedly considering filing for bankruptcy just in terms of before we get into, ultimately, how they could change the landscape here for the travel industry.

But have you seen a shift maybe for people maybe favoring that premium offerings that we do have?

Sure.

So overall, you know, we've seen prices largely normalized versus last year.

So consumers are paying essentially about the same price for a hotel stay or an airline ticket in terms of what they paid last year as we move into the fall though a few things could shift.

Um several of the airlines are starting to pull some of their inventory out of the market.

So spirit obviously a big cut just announced within the last couple of days earlier in the quarter, United Airlines had announced that they were going to remove some capacity.

So as capacity comes out, we could see prices increasing in the airline industry on the hotel side.

though we still see new capacity coming into the market, albeit very tepid half a percent to a percent each quarter being added to the industry that largely is keeping prices relatively stable up, maybe one or 2% year over year.

So I think the dynamics are going to shift, but the airline industry clearly could see some bigger changes coming a month or two.

Yeah, a lot of changes including a merger between Alaska Airlines acquiring rather Hawaiian Air.

We spoke with Secretary Pete Buttigieg earlier this morning about the aerospace in general.

Let's take a listen to what he had to say.

Well, I'm always concerned about the competition in the airline sector because this is a sector that used to have dozens of uh of players and they were consolidated especially over the last 15 years to where we're really at a big four and then uh and then some low cost competition.

So you know, any one company of course has its own issues as a business.

Uh But when I think about the industry, the sector and the industry structure, it's certainly a concern.

So the concern from the White House's perspective, right is a concern for you.

Well, any time you have more consolidation in an industry that does put pressure and the pricing on consumers over time, I think this most recent move a little less likely to do.

So listen, folks are trying to compete with some of the bigger players in the space.

And so that helps to consolidate and to drive, you know, more product into the industry ideally.

So we'll see how that, how this most recent acquisition will shift things.

But again, typically more partners that we can work with the better as we can access their pricing and inventory and, and share that with consumers, you know, Brad, as we look ahead to the next couple of quarters and then even the next couple of weeks, one of the likely themes I think that we're expecting to hear over this earnings season is to be more mentions of A I how companies are incorporating A I within their business.

I know a Priceline.

You guys just launched new, a new A I travel agent.

I'm curious what you see this doing.

III I guess the impact that you see this having to your business and then ultimately going back to where we started the conversation on head count on jobs.

Does this all future hiring plans at all?

Sure.

So we believe in the travel industry A I has a number of really powerful applications.

I think one of the most obvious and where people will begin to lean in here over the next year or two is in the customer service area.

We found that right out of the gate by uh giving people access to our A I chatbot, which we've named Penny.

Uh she can handle questions uh much faster than can a traditional chat agent.

And she has access to a significant amount of data and information which just makes the interaction with consumers faster and easier over the long run.

We also see, you know, a lot of uh uh application within the consumer trip planning and booking experience.

That technology is still quite nascent, but just this week, we launched Penny Voice, which with which is a partnership with Open A I where consumers can come in and begin to engage real time by talking to the application and talking to Penny, which enables you to again just having more comfortable and casual conversation with access to infinite information on trip planning and trip booking processes.

So those things will shift and will aid the consumer in making reservations faster and in getting service faster on the back end when they run into challenges and issues and certainly making those bookings easier is important for the bottom line.

I bet Brett, thank you so much for joining us Priceline CEO.

Really appreciate it coming up.

Here.

We've got a conversation with constellation brands, CEO Bill, new ones about the company's latest earnings.

Friend stick around for that next right here on catalyst, consolation brands reporting.

Mixed a second quarter results better than expected earnings but revenue falling just short alcoholic beverage company see 6% gain in net sales for its beer brands, but that was way down by a 12% decline in wine and spirits.

Let's talk about the quarter.

We are seeing a bit of a move to the upside here this morning with shares of just about 1%.

We want to bring in Constellation brands, Bill Bill Newlands along with Yahoo Finance's executive editor, Brian Sazi.

Great to have both of you here on set and Bill.

Congratulations on this most recent quote.

I wanna start with.

Maybe what was one of the focuses here of this print and I know it came up a couple of times in the earnings call where beer depletion, the softness, maybe that we are seeing there.

You, you gave us some sense of the macro factors.

But I'm wondering if you could elaborate that on a little bit more and tell us maybe what you are seeing currently here within this quarter.

Well, fortunately, we're seeing some real change in the last few weeks.

If you look at circa of IR I data, uh the four weeks is better than the 12 weeks is better than the 26 weeks.

So we're starting to see a bit of change.

I think the jobs report this morning may have been a good indication that some of that concern about unemployment might be getting a bit better.

Uh Hispanic unemployment have been slightly higher and half our business is with the Hispanic community.

So we're pretty optimistic that things are gonna get better.

I'm glad you mentioned uh the Hispanic community 5.1% unemployment rate higher, relatively speaking, relative to other categories.

What do you see when those shoppers go to the supermarket?

Are they buying less Corona?

Is it molo is it across the board?

You know what tends to happen, Brian is that people will buy what they call value packs.

So if there's, if they have plenty of disposable income, they'll tend to buy 24 packs or something larger.

If they're a convenience store, they'll tend to buy 24 ounce.

So they look for things that have more value when there's a bit of a tightness in the unemployment area or their concern about, about money is the, is their biggest concern still in inflation?

Now, you've been very, uh you've told me before, you've been, you've held the line on prices a lot.

But is this the consumer that is having to make tough choices when they go to the supermarkets to some degree?

I mean, the fortunate part for us with the Hispanic customer is there's great brand loyalty and they view beer is really a fundamental in what they do and with their lifestyle.

So that part is very helpful.

But there's no question that if, if things are tight or there's concerns that people get a little bit careful and they tend to buy more value packs.

I'm curious within the company itself too.

From an operations perspective, you talk about the unemployment report from this morning, we did see wage growth increasing and I'm wondering when you think about the balance sheet moving forward, revenue moving forward, is there a potential for your own employees to be maybe asking for more money and getting a little bit of the confidence we coming out of the pandemic and will that potentially be a headwind?

I'm not sure that will be a headwind.

I mean, we are very careful about what we do on the, on that side of the equation and we treat our employees very well.

And we think that's part of why we've been as successful as we are, is we have a lot of strength in our employee base.

So I don't think that's gonna be a big issue for us, uh going forward, you know, Bill and, and I know I brought this up and we've talked about this in the past.

It's still getting headlines of the shift, especially younger consumer, Gen Z not drinking as much or, or, or having alcohol, beverages as much as maybe some of the older generations.

Is that something that you're still seeing as a potential headwind to the business.

And I guess in terms of some of the efforts that you have made within this space, what is that strategy look like?

5, 10 years down the road, you are seeing a little bit of change and what it's not that people are not drinking.

It's that in an evening, they might have a Corona and then they might have a Corona non alcoholic to intersperse those two.

I mean, we introduced Corona non alcoholic last year and it was a huge success and we're expecting that to double this year.

So you are seeing some of that movement.

I think the key thing that's, that's different today than what it used to be is if you have a Corona non alcoholic, it tastes just like corona extra.

You know, it used to be a non alcoholic version.

Frankly, it didn't taste very good.

Uh Fortunately, that's not the case anymore.

So we think that's gonna continue to be an important part of uh of what we're doing going forward.

You, you didn't own Zima, right?

That stuff is terrible.

I mean, for your kids out there, I mean, I mean that you don't even know what Zima is.

We're gonna have to take it off.

It's a long time ago.

Yahoo Search and folks you hear all about uh just the dread that Zima.

But um you're at a crossroads.

Are you, do you think you're at a crossroads in your wine and spirit business.

Now, several quarters of challenge, you've taken a lot of costs out of the business.

But are you, at the point, we have to make a decision that maybe you're gonna bulk up, uh acquire some higher end brands or maybe this portfolio maybe just go really all in on beer.

Our, our focus right now is on improving the performance and the operating performance of the business.

At the start of the year.

I said it's gonna take us 9 to 12 months to get this back in order and we're six months into that program.

We're starting to see some good green shoots.

Uh brands like Naomi and Kim Crawford and, and the prisoner uh are seeing some significant improvements and the high end of our business is doing quite nicely.

The challenge has been the low end uh that's been challenged for the industry overall that below $11.

So our focus at this point in time is to get that business in order and make sure that we're doing everything we can to improve the operating performance of it.

Where is a business like this in five years?

I mean, clearly, you see people gravitate towards beer, non alcoholic options.

You see Hard Seltzers are, are still a thing, higher end uh spirits, you know, where is this portfolio?

I think it's a lot like what we've done with beer.

All of our beer is at the higher end of the marketplace and I think you're going to continue to see us focus more and more time and attention in our wine and spirits portfolio toward the higher end.

That's where the opportunity for growth is.

That's a better margin structure.

And frankly, that's where the consumer is going.

I'm curious too about the port strike.

Looking forward to January.

It's a story that is a way for now but not a way permanently.

How big of a potential headwind could that be for you?

And how are you strategizing around that?

Are you thinking of increasing inventory already heading into the New Year?

Yes, that's what we do in any situation where we anticipate those kinds of issues.

We'll bring additional product into the marketplace.

You know, we would import Ruffino from Italy.

Uh We import Kim Crawford from New Zealand.

Uh We always try to get ahead of those things when we anticipate them so that they don't become short term issues.

Wait, we're the only ones that heard of Zima.

Like I just wanna rewind that.

Ok.

I just wanted to, it's a good thing that we've never heard of judging from the two of you over to you guys over to you guys when I type it in it.

All right, great stuff.

Thank you so much as always.

I know what my research and of course I think are very young Brian.

So for bringing us the conversation, we appreciate it coming up here.

Chicago fed President ain go be joining us to give us some insight on what the red hot September Jobs Report could mean for the Feds path forward.

Stick around.

That's next.

Welcome back to Yahoo.

Finance, live from the labor department here in Washington DC on this jobs Friday.

I'm Jennifer John Burger for more insight on this morning.

Much stronger than expected jobs report and what it means for the path forward for the Federal Reserve.

I want to welcome into the program, Chicago that president often will be often.

It's great to see you.

Thank you so much for joining me on this important day.

Thanks for having me back.

You have shown greater concern about the job market.

We got a much stronger than expected report across the board.

How are you viewing this?

Do you see this is an anomaly as a one off or is this a strengthening in the job market?

Well, I I think it's a superb report to, to uh to start.

I always say here and everywhere else don't get too worked up about any one month's report.

Remember it's plus or minus 100 and 30,000 jobs just the, the margin of error.

So the last two months when the numbers were disappointing and people began to freak out.

I said, let's not overreact to one month's number.

This is a very good number and we got revisions on some of the previous months.

If we get more jobs reports, like this with the unemployment rate, hopefully settling in, in kind of the low fours type of range.

While we're simultaneously getting inflation reads that are right at, at or even below the 2% target.

It would give me, I can't speak for anyone else on the committee by the rules, but it would give me more comfort that we are achieving exactly where we want to be.

And it was our goal.

I, I've been saying the critical question as the job market cools to a sustainable full employment level.

Can we stop there or is it going to deteriorate and kind of crash through normal?

The more reports like this we get the more confident I would be that that it's where we want to be.

Yeah, I'm curious whether you said it one data point doesn't make a trend, we need to see more data.

But does this your concerns that you had about the cooling job market?

And at the same time, we did hear fed Chair pal say that the job market doesn't seem to be creating upside for inflation at this point.

But given the strength that we saw, does that put inflation or real elevated back on par with risks to the job market in your view?

Uh I think what, what I heard Chair Powell say at the press conference I thought was almost exactly that there are balanced risks on both sides of the mandate.

Now, both inflation and unemployment that that we're gonna look at where for a year and a half plus it's been almost exclusively about fighting inflation and getting inflation down.

A and I that message that Chair Powell gave I I think is, is wise and exactly the way we should think about this.

I I in this circumstance, if GDP growth is coming in as strong as what some of the forecasts are saying and if the unemployment rate and the jobs numbers keep coming in, like what we saw for this one month, I think we would have a lot of confidence that the growth slash recession risks had lessened as long as you've got inflation numbers coming in at or below the target and inflation expectations are at 2% or even below 2%.

I I don't think that the, the the risk is as high on that side of the ledger either that would probably make you start thinking is the productivity growth rate surge that we've seen in the last year and a half gonna be more sustained.

And if so, uh pretty much only good things come from that you said that rates need to come down by quote a lot given today's data.

Of course, depending on the path for the fact that you cut by 50 basis points.

Last policy meeting.

Does this change the calculus for you as you look ahead for the rate cutting path?

Well, remember my statement that rates would come down a lot over the next 18 months that we've got inflation coming in where we want it at or around the 2% target that we got the unemployment rate at 4.2.

Now, 4.1% at or around the level we think is sustainable, full employment.

If you could freeze the picture right there, you will put it in a frame and hang it on the wall and that if the rates are well above what people think is neutral where they're going to settle, then if they're that high for too long, you're gonna have to start worrying about the other sides of the mandate that you, you can't freeze it in that frame if you're very far above neutral.

And if you look at the SEP dot Plot, you see that the broad expanse of the committee believes that the ultimate settling point of rates is well below where we are right now.

I don't think that calculus changes.

Um It's still a long, it's the through line.

It's not, it's not about what's the first cut.

How big is it?

It 2550 0 of, of individual meetings.

It's if you look at the end of 2025 do you think we're still going to be in the spot where we are now?

And I think we're going to be a fair bit lower if conditions continue like this.

So then looking at the median projection based on the CP, which guides for two more 25 basis point rate cuts for the remainder of this year.

Does that still seem reasonable to you?

Uh You, you know, I don't like tying our hands or committing to specific rate changes at the next meeting or the, or the meeting after that because we're gonna get a bunch more data before those meetings and because I'm gonna go sit down and hear what uh what my colleagues have to say.

I think our goal is to keep the conditions of the dual mandate, the inflation and the unemployment almost exactly where they are right now.

And the hardest thing that a central bank has to do is get the timing.

Exactly right.

When there are moments of transition, we've, we're in or around a moment of transition right now, we are transitioning from a almost exclusive focus on cutting the inflation rate to a more balanced approach where we're thinking about the tradeoffs and keeping inflation around the target, keeping unemployment around this full employment, sustainable level.

And we, we're gonna have discussions and arguments over what's the rate that we ultimately need to settle on?

But I think over a 12 to 18 month period is with without substantial changes to the conditions.

I still see that, that analysis that is held by a lot of the committee that feels right to me.

Where do you see neutral right now, Austin?

And how quickly do you think that you need to get there, both of those are, are challenging and, and important questions.

Of course, I think that if you just go look at the dot plot of where do people think that rates will ultimately settle down?

And if you call that neutral, the bulk of the committee is, let's call it in a 2.5 to 3.5 kind of a range.

Um, and has outlined uh that the appropriate rate to get there is over 12 to 18 months.

It completely depends on how conditions evolve though.

Is, is, is what I would like to add you.

We can't, we can't determine the pace at which or even the direction at which we want to get uh to neutral in the short run.

Unless we know our oil price is gonna go up because of war in the Middle East is, it looks now like there's not going to be a strike among the longshoremen and the dock workers.

But external shocks like that have derailed many a soft landing uh in, in, in previous times.

And we've got to be attuned to all of those conditions before we can answer that.

Well, often, unfortunately have to leave the conversation.

There are always so many questions for you.

We still appreciate you coming on today on this important day to talk to you.

Yeah, that's a go the president of the Chicago Federal Reserve ma I said it back to you in New York and thank you so much for bringing us that conversation.

Really appreciate it.

And coming up here, we're going to have more reaction to that September Payrolls report with former National Economic Council Director, Gary Con the ground for that conversation.

Next on catalyst, the labor market showing signs of resiliency after the September payrolls report showing showing came in well above estimates that 254,000 while the unemployment ticked down slightly joining us.

Now we want to bring Gary, he's IBM, vice chairman and the former director of the National Economic Council and Gary, it's great to have you here on set with us.

Let's start with that print that we got this morning.

We just heard from Austin Goolsbee praising it, calling it a very, very strong print, but he's quick to point out that this is just one report.

So I'm curious, what is your assessment of the US economy today?

Well, I I agree with that and I always remind people when we get the jobs report, this is probably the least scientific data that the US government puts out.

This is actually polling data, they call people's houses and that's how they come up with this information.

And that's why we see relatively big revisions to employment data month over month.

So I always say always take these reports with a grain of salt, but the trend is important, the overall trend of what the employment report tells us.

So if you sort of take the last three months and average them together about 100 and 80 100 and 85,000 jobs, which is exactly about the amount of people entering the workforce.

So we're, we're at a good, really neutral place where the jobs being created and the people entering the workforce, they're balancing each other out, which is a, which is a good place to be.

Um So we're seeing a real normalization of what I would call the US economy.

Everything about what we're going through, I think is normalization.

Now, in that respect, we all forgot what normal is.

We have not lived in a normal economy in the last decade.

Plus, you know, we were in AAA time where we had zero interest rates where if you saw an article about the Federal Reserve, it would be, will there ever be inflation again?

And we go from that zero interest rate.

Will there ever be inflation again to an 8% inflation print?

And we see rates going up by 500 basis points in the year.

Now we're starting to get back into what is a normal economy.

And I think we have to remind ourselves what a normal economy is, a normal economy with like 2% inflation, 4% unemployment, a positive shaped yield curve.

All of those things.

If you look at the long term history, you would find to be the normal, normal reality of what our economy looks like, well, there is some good, actual, good, good news out there.

Right.

We had inflation adjusted wage gains about to be higher than they were for much of 2019.

That era we all love to think back to.

Is there a potential that this is just what a soft landing looks like?

I think this is exactly what a soft landing looks like.

I think, I think the fed has orchestrated a soft landing.

I think we will continue to see the fed lower interest rates.

Although today's print gives them the ability to do what I think they were gonna do anyways, which is continue to lower rates, but lower them slow, slowly, methodically.

I think we'll get another 25 basis points in the next meeting.

We'll probably get 100 basis points over the course of this year.

It's interesting the market themselves more than what they said though.

They said 50 basis points of cuts this year.

Uh I think we had another 50 this year.

I think we'll get a total of 100 this year.

Um We're, we're still that, that would still take us.

We'd still be in, in, in, in sort of the 4% plus interest rates and fed funds.

Um, which to me is, is, is still restrictive based on where you see inflation is.

We're still gonna be, you know, substantially higher than inflation.

So we'll still be in a restrictive place.

Um, and, and I think but they think the fed has the ability to sort of monitor data.

There's no gun to their head to do anything.

And as long as this employment data stays where it is, II, I think this, we'll see, I think we will see interesting reactions.

And II, I think we've already seen this in some of the yield curves.

I think that we are starting to see a re deepening of the yield curves.

you know, twos tens were inverted for a long period of time.

Two tens are now positively sloped.

I think we're going to continue to see much more positive slope go into the yield curve.

So even though the front end fed funds, which is what the federal reserve controls is going lower, I don't think the 10 year rates and the 30 year rates are going lower and in fact, they're up dramatically today and they've been going up even as the FED has been talking about lowering front end rates.

So I think we're gonna go back to AAA pretty positive shaped yield curve.

Gary, what do you think of the job that fed Chair Powell has done so far?

So I think if you take it in its entirety, I think he's done a very good job.

You know, we can pick on pieces of what he's done and, and, and, and by the way, anyone can always criticize certain segments.

So, but if, if, if I look back on the entire was it seven years now?

Six y six plus years.

He's done a very good job.

You know, I, I think I, I criticized them for being late to the inflation fight.

They, they were thinking it was more transitory than it actually was.

But once they got in the game and once they realized they had to become inflation fighters and that part of their mandate was important.

They got aggressive on fighting inflation now that they see that inflation is renormalized back to their target rate of of, of 2% which is the stable price of their mandate.

They're looking at the employment picture.

So, you know, we started to see employment um soften and and look, employment still is softening.

There's other data than the employment report.

If you look at the jolts data, you see that the amount of job openings has come down dramatically over the last couple of years, you know, we're still at a high level, we're still, you know, close to 7 million jobs openings in the United States, but we were well over 1112 million job openings at at at the peak of the tight job market.

So I think that the Fed has, has done a very good job of shifting from the other side of their, their mandate from, you know, stable prices to full employment.

And now they're in the position where they're gonna balance those two things out with time on their side.

I want to switch gears a bit and talk about the election that looming event in the air coming in.

I know it's shocking you might be that it took us this long to get to your economic view here.

But we have that 82 page platform from the Harris Walz campaign, right?

Tons of credits put in there from housing to small businesses.

But there are also some credits coming out from the Trump campaign as well for the economy and the way to pay for them is through tariffs.

I mean, are you concerned about no matter who gets into the White House, there's going to be a lot of spending.

Look, I'm always concerned about deficit spending because I think at the end of the day, we have to be cognizant of our deficit spending.

You know, the largest single item that we have being spent in the US government today is deficit.

We're over $3 billion a day of interest service on our debt.

It's dwarfing what we're spending on the military.

So you think about that, you think about the amount of money we're just spending on interest to service our debt today.

It is a stifling number and it will get bigger over time as the debt builds.

We have to think about that.

That's one of the reasons why I I'm so convinced the yield curve is yield curve is gonna get steeper and steeper is because of the amount of debt.

So Yes, I'm always concerned about the amount of debt that we're building up.

I think it's very important and I think both candidates need to understand and I think some of them do is that we need to grow the economy.

The only way to really deal with the debt problem is to grow the economy.

Our debt as a percentage of GDP can go down if our GDP goes up, we have that to me that is the essential ingredient is do economic growth.

I don't believe we should be in an economy where it's based on a plan of redistribution.

I think we should be in an economy where we're based on a plan of economic growth and, and we want to provide a system of rules and regulations and regulatory environment where we're encouraging growth, not discouraging growth.

So then Gary given what we know, I'm not asking who is ultimately just from what we do know right now, from the facts that have been laid out is one candidate better than the other for the economy or is it more of, is there too much uncertainty that still remains here?

Here's what I think we do know for sure because as you said, there's an 82 page economic plan from the Harris Walls campaign.

There is a lot of rhetoric from um the, the, the Trump JD Vance's campaign.

I think what we know for sure.

And this is how I evaluate.

We know what the economy look like for the four years of the Trump presidency.

We know what's gone, what's happened in the Harris Biden presidency.

We know what those two economic pictures look like.

I think you've got a lot of data to make a decision, what economy you like now, I'll, I'll be honest, I happen to like the pro growth, the reasonable but sensible regulatory economy that we had during the Trump administration.

I think this overly protective, overly restrictive, um highly regulatory economy that the Biden administration, Biden Harris administration has is not beneficial to growing GDP, especially when you keep losing cases in court where you're trying to restrict the economy and the, and, and, and your restrictions don't even hold up in court.

Gary real quick before we let you go.

Let's talk about the corporate tax rate, right?

I mean, that's one of the things that's being debated.

We have 20 28% on the talk of the Harris campaign all the way down 15% from Trump.

I'm curious just in your role at IBM, if we do see 28% what does that mean for larger corporations?

It's bad.

How bad it's bad.

So, look, when we rewrote the tax code, you know, one of the most important things I thought we had to accomplish was that we had to make ourselves competitive with the rest of the globe.

You know, corporations compete around the world, we sell it.

There's many us companies that sell more, vastly more products overseas than they do in the United States.

There's many companies prior to the US tax rate going down to 21% that had the option to re domicile into another country to avoid paying us taxes.

They were inverting their businesses out.

It was a horrible thing for the United States to see companies that wanted to be based in the United States leaving the United States for one reason and one reason only to lower their corporate tax rate.

We have not had a company leave the United States since the corporate tax rates down to 21.

The OECD average is the, the, the countries that we care about.

The average tax rate on the corporate side is right there in the low twenties.

It's 2122.

It's right in that area.

That's where the sweet spot is.

We do not want to discourage companies from being based in the United States and paying taxes in the United States.

We also in that tax tax change, forced companies to pay us tax for offshore earnings and we forced them to bring back, we didn't force them, but we encourage them to bring back offshore earnings.

I think that the, the encouragement by and we encourage them by, by deeming a tax on their offshore earnings by deeming that tax, a enormous amount of money came back in the United States, hundreds of billions of dollars came back in the United States and that money is being reinvested in the United States.

And that's one of the basic reasons.

I think our economy is so strong.

I think a lot of people have missed that point.

All right, Gary Cohn, we gotta leave it there, but really appreciate you making the time for us.

Thank you so much again IBM, Vice chairman Gary Cohn joining us here in studio.

Thanks for having us coming up.

We're taking a look at Yahoo Finance is trending taker, stick around for us for more right here after the break.

Now, time for some of today's trending tickers get the QR code below to track the best and the worst performing stocks of the session with Yahoo Finance's trending tickers page first up Cisco.

Cisco has reportedly agreed to invest in A I start up core Weve valuing the company at $23 billion according to a Bloomberg report.

Now core Weve already has some big name investors like NVIDIA Fidelity and Jane Street.

You are looking at the move higher in Cisco systems today up just about 3/10 of A percent.

But I think the big takeaway here for investors is ultimately matty.

What this tells us about the future of A I, the interest that we're seeing from these larger tech giants, those that already have a footprint and exposure to the A I space, just how much they are willing to spend, how much Capex they are planning to allocate towards A I investments going forward.

And ultimately the impact they see A I having on their business here from here on out, especially a company like co we that it had touch points with the likes of NVIDIA, right?

In video is one of the early adopters or co we rather was one of the early adopters for NVIDIA graphics processing units and they are using those to build out their own data centers here.

So certainly something will continue to monitor that A I boom.

But we want to get to shares of Spirit Airlines plummeting as low cost carriers efforts to avoid bankruptcy are in jeopardy.

That's according to a report from Bloomberg now, Spirit seeking new financing looking to extend its current debt without a deal, the company could be forced to file bankruptcy.

The Wall Street Journal reporting Thursday, that Spirit has held bankruptcy discussions with bond holders.

All this coming after a failed attempt to merge with jetblue earlier this year, you can see that spirit down 20 2% right now.

Earlier today was down 30%.

And this comes on the heels of a lot of pressure we've seen across the airline stocks over the last week here.

We've seen some of these names on your screen moving to the upside off of the spirits news perhaps.

But earlier this week under pressure and my interpretation of that was that it was due to some of the extension to the upside that we saw in energy stocks.

And it will be interesting to see how this plays out moving forward here, especially, especially when you take into account the 16 17% move higher here from jetblue.

Let's take a look at the health care space, health care jobs growing last month, the sector adding 45,000 jobs in the month of September to break it all down what this means for the industry.

We have the best person ask in the newsroom.

Yahoo finance is very own Angelique him.

Lani.

Hey, that's right.

Uh This month was really interesting when it came to the jobs report because we did see a little bit slower growth in the sector than we have been seeing in the past few years.

But one thing that I thought was an interesting number was blow out from the home health care.

And that breakout is interesting to me because we've seen over time that that breakout hasn't been consistent and it tells me that with ambulatory, not necessarily being a key focus anymore, it's shifting to home health care and that's important to watch in the next few years.

We've talked about the aging population and how that's going to be impacted.

So that's a key one to watch and Eli Lily and were removed from that FDA shortage.

I'm curious from your perspective, what that means for Eli Lilly moving forward here and also then what it means for some of the competitors in the space like Hims and hers, which is down, I think 30% yesterday.

Yeah.

Interesting that they were because they are actually not providing to appetite.

They're actually providing no, no semi glu tide.

So, what's interesting is the compounding pharmacies and the compounding manufacturers are going to be really hitting up a countdown clock now, which is a sort of weaning of when they're allowed to provide the copycat versions of that bound and one jar.

So that's one thing to watch as a result of this news.

And it's important to point out that this is actually follow up to like really notifying the FDA back in August that they were starting to produce more of the drugs and they should be getting off the supply shortage.

But it is important to note that the metric use for that is unclear.

So whether or not what that means of sort, meeting current demand, there are still going to be some patients who may not be able to immediately access it, but it does put in a much better place than competitor.

And no, no, because we've seen in the weekly prescriptions that are filled, that really is sort of edging ahead in both those categories of type two diabetes and weight loss.

So it's going to be interesting for novo to see how they catch up now that they're still on the shortage list pressures on and thanks so much, we're coming up next hour.

We've got wealth that's dedicated to all your personal finance needs.

Brad Smith will have you here for the next hour.

So stay tuned.

Have a great weekend.