Daybreak Weekend: US Jobs, Germany Elections, South Korea Inflation

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**Nathan Hager** (0:10)
This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our Daybreak anchors all around the world. Straight ahead on the program, we look ahead to August jobs numbers in the US. I'm Nathan Hager in Washington.

**Caroline Hepka** (0:23)
I'm Caroline Hepka in London, where we're looking ahead to the state elections in Eastern Germany, what it could mean for the rest of Europe.

**Doug Krizner** (0:30)
I'm Doug Krizner looking at whether the reading on South Korean inflation will point to another rate hike from the BOK.

**SPEAKER_1** (0:38)
That's all straight ahead on Bloomberg Daybreak Weekend, on Bloomberg 1130 New York, Bloomberg 99.1 Washington DC, Bloomberg 929 Boston, DAB Digital Radio London, Sirius XM 121 and around the world on bloombergradio.com and the Bloomberg Business App.

**Nathan Hager** (1:02)
Good day to you. I'm Nathan Hager. We begin today's program with some key economic data in the US, non-farm payrolls for the month of August are due out this Friday, 830 a.m. Wall Street time, as it is the first Friday of every month. And for more on how this month's numbers could affect Fed policy, we are very pleased to be joined by Edward Harrison, senior strategist for Bloomberg News and author of the Everything Risk newsletter. Ed, what's the risk of the kind of negative surprise that we saw from the July non-farm payrolls print?

**Edward Harrison** (1:35)
I think the risk is relatively high, Nathan, because of the temporary protected status workers who have now left the payrolls. I think that that's the big question.
How many of those workers were working under temporary protected status, and what does that mean for non-farm payrolls? It could actually be such a large number in the hundreds of thousands that you see a negative number for the next month as well as last month.

**Nathan Hager** (2:09)
You're talking about the impact of tighter immigration policy on this labor market. Is that part of what we've been seeing in the overall trend?
When it comes to labor market growth of this low-hire, low-fire environment.

**Edward Harrison** (2:24)
It definitely is. I mean, there are two factors that come together. One, as an economy tightens and gets closer to full employment, you naturally have fewer opportunities.
The massive gains that you have at the beginning of a cycle just aren't there at the end of a business cycle or in the middle of it. Then, secondarily, you see in the United States in particular recently that we've tightened immigration policy in a way that will mean non-farm payrolls are closer to zero on average than they were before, meaning that you can get these negative numbers and it's not necessarily a sign that the economy is weak in the way that it would have been when we had a large growth of immigration. The case of the Haitian workers who have lost temporary protected status in particular, that is an encapsulation of that immigration policy in a very single month, and that's why this particular number is volatile and could surprise to the downside.

**Nathan Hager** (3:33)
Is that the main factor at play here? Is it immigration policy? What other factors could potentially be at play here when it comes to what we could say?

**Edward Harrison** (3:42)
I think there are some benchmark revisions that are coming in to play, so that's going to muddy the water somewhat.
And then you also have the participation rate, which has been going down as baby boomers age, and so that also plays a factor. So there are multiple factors, but I think just because of the, how quickly the status change happened, that will probably be the main factor, and I would say that the benchmark revisions are going to be the secondary factor, and then sort of trend factors add on to that.

**Nathan Hager** (4:20)
There's been a lot of talk as well about whether artificial intelligence is having an impact on the labor market as well. Are you starting to see that come into play?

**Edward Harrison** (4:28)
You know, I haven't really seen that come into play in particular because it's not clear whether or not that's a positive or a negative factor. There's been such a huge boom in artificial intelligence-related positions that it could be a positive factor there, but then taking away potentially in displacements that we're starting to see pop up as a negative factor. And therefore, it's not clear if the trend is net positive or net negative at this point.

**Nathan Hager** (4:59)
So is it your base case then that when we get those numbers on Friday that we are going to see a negative print?