Transcript: Monday, May 26, 2014

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib, brought to you in part by —


TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Good evening, everyone. And welcome to a special Memorial Day edition of NIGHTLY BUSINESS REPORT. I`m Tyler Mathisen.


Well, today is a Memorial Day — a day to honor the men and women who died in the military serving our country. But it`s also marking the unofficial start of summer and all that goes with it.

MATHISEN: Thoughts turn to vacations, and blockbuster movies, new homes, barbecues. Make no mistake: summer is a time for spending.

So, whether it`s the best deals on travel or how high gas might go during the dog days of summer or hopes for a strong home selling season this year — tonight, we`re going to look at how all of that summer spending impacts you.

GHARIB: And so, we begin with housing. The numbers are in for the spring and the housing numbers have been a disappointment on every level.
And that has some saying the summer season has to offer some kind of bump.
But will it?

Diana Olick takes a look.


Sales down, construction down, and supplies of homes for sale still well below normal.

STEVEN BERKOWITZ, MOVE INC. CEO: I think you`re seeing more people go out there and attempt to get the financing before they actually get it to the market, which I think slows things down quite a bit.

OLICK: Tight credit conditions continue to be blamed for the stall in the housing recovery. As all cash investors move out, mortgage-dependent buyers need to pick up the slack. And so far, they`re not, especially first-time buyers.

DAVID STEVENS, MORTGAGE BANKERS ASSOCIATION CEO: Unemployment for first-time homebuyers is higher. It`s about 11 percent for 20 to 24-year- olds. Student loan debt is very high. So, there is nothing kick-starting the low end of the market.

OLICK: Mortgage applications to purchase a home last week were down
12 percent from a year ago. That does not bode well for future sales.

BERKOWITZ: Well, I hope to see some of the pent up demand make up for the spring, but we`ll see. I mean, I think what we`ll see is a slow and steady process from this point on.

OLICK: The only part of the market that seems to be improving quickly is the high end where wealthier buyers are less dependent on mortgage rates and availability. That is especially true in the summer vacation home market.

MIKE PRINGLE, COLDWELL BANKER SEASIDE REALTY: I would say 65 percent of my clients are all cash. So, money is available to qualified home buyers. So, usually, 20 percent down and they get into a place.

OLICK (on camera): For the rest of the market, fast rising home prices are making homes less affordable for buyers and are keeping sellers either sidelined because they are waiting for greater gains or causing them to overprice their homes.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.


MATHISEN: Well, one group that`s probably not ready to buy a home, college grads. With commencement season winding down, graduates are turning their attention to finding a job, and with many burdened with crushing student debt loads getting into the workforce, sooner rather than later is a top priority.

Hampton Pearson surveys the landscape for the class of 2014.


For the class of 2014, the job market is getting better, sort of.
Unemployment among last year`s college graduates was nearly 11 percent, down from 13 percent in 2012. But that`s nearly double the current unemployment rate of 6.3 percent.

Job placement experts say the sluggish recovery continues to delay graduates finding jobs or if hired, they are often taking less pay.

GARY BURNISON, KORN FERRY CEO: Unfortunately, today is college is yesterday`s high school. You just have to accept that.

But you have to be strategic. And you want to target the industries and the companies that you would have an interest in and find people that work in those industries and those companies.

PEARSON: But graduate spirits remains high, 84 percent of this year`s graduating class expect to find jobs in their chosen field, according to a brand-new survey from Accenture. Twenty-two-year-old Laura Schwartz, who just graduated from George Washington University, began her job search more than a month ago. She`s determined to get a job in social media and marketing, part of the new economy but already seeing stiff competition.

LAURA SCHWARTZ, RECENT GRADUATE: I`m very confident in my skills as a social media manager of my blog and I know that I can do really well in that field and I think that it`s a growing — social media is really growing and it`s becoming a huge part of businesses and I know that I can really make a difference in companies by being their social media manager.

PEARSON: Job search professionals agree there is growth in social media, but the best career prospects, they say, are in technology, energy, and health care.

BURNISON: Technology, by far, is number one, which makes intuitive sense. But also, when you look at America over the next decade, it`s hard to not pay attention to energy, all the activity that`s going with fracking and the like, as well as health care. You know, health care will be 20 percent of its economy.

So, I would say, you know, it`s health care, it`s energy, and it`s technology.

PEARSON: The class of 2014 has been called the most indebted class ever. Those with loans owing about $33,000, on average. But those graduates can expect to earn far more in a lifetime than those without a college degree.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.


GHARIB: Conrad DeQuadros joins us now with more on the job market.
He`s senior economist at RDQ economics.

You know, Conrad, every parent and kid think when they get a college degree they are going to get a job but it seems like some are more successful than others. What does it depend on? Is your major perhaps or just being persistent?

CONRAD DEQUADROS, RDQ ECONOMICS SENIOR ECONOMIST: Well, I think the major is an important consideration if you look some of the statistics on people`s majors and the industries. There are certain standouts in terms of lower unemployment rates for college grads.

Another point I would make is that sometimes it`s just a matter of timing in that unemployment rates for college grads start off pretty high but then they come down as they take some time for college grads to transition into the labor markets.

So, once a few years have passed and maybe that involves taking jobs that college grads are not particularly keen on, the unemployment rate for college grads is significantly lower than overall unemployment rate.

MATHISEN: So, I`m guessing that a philosophy degree isn`t going to get you the job that several other degrees might. What are the ones that have the highest sort of hit rate for employment?

DEQUADROS: Well, the Federal Reserve has done some research and the Labor Department actually puts out estimates of what industries are going to do well over time and what the Federal Reserve in this report has found is that some of the more technical areas have seen better job prospects than areas where the degree might be in the liberal arts, for example.

So, degrees in engineering, degrees that are in the health care sector, those are areas that have been somewhat stronger and the expectation is that that is likely to continue. You had a prior guest talked about the energy sector. That`s going to be majors that are a little more technically oriented than some of the more social sciences or liberal arts types degrees and those are probably going to be stronger areas of the labor market.

GHARIB: You know, Hampton ended his piece by saying that the class of
2014 is the most indebted class. You know, most of these graduates want to be able to say, “I graduated and now I`m working at, you know, fill in the blank.”

But most of them are saying “I graduated and I moved back home.”

Is that the new reality and how do they pay off all of those loans?

DEQUADROS: Well, definitely, student debt is an issue and the extent to which student debt has risen. But one point is there seems to be this linkage between level of student debt and the fact that the labor market is still tough for college grads, and some people questioning the value of that. But I would point out that there still is, if you look at unemployment rates for college grads and for people as a whole, over time the unemployment rate is significantly less for college grads.

So, I think it starts off difficult and there is evidence that it is sometimes a difficult transition to make from college to the labor market but I think those returns are there. So, over time a college grad is probably going to be in a better position to address those levels of debt away from the fact that the level of debt are extraordinarily high compared to recent history.

MATHISEN: Very quickly, Conrad, I was with a father/son owners of the staffing company that serves the energy business out of Tulsa, Oklahoma, the other day, and they said that they can`t find people with the requisite skills, welding, other kinds of things that pay good money, $60,000,
$70,000 a year. They just can`t find the people.

DEQUADROS: Well, I think you`ve hit on a very important topic. One of the issues in the labor market is that there are very elevated levels of job openings, which is odd, relative to the number of people unemployed.

Usually, the number of job openings that we have right now would be consistent with a significantly lower unemployment rate, even for college grads.

So, there is this issue that there appears to be issues with job matching and the qualifications that people have are not necessarily well matched with the jobs that are out there. And that`s something that is not going to be addressed in the short term but I think in terms of better communication doing businesses and colleges about what businesses are looking for, that could address this issue in the more medium turn.

GHARIB: New freshmen should be listening to this interview and all the advice you`ve given so they choose wisely over the next four years.

Conrad, thank you so much for coming on the program.

DEQUADROS: Thanks for having me.

GHARIB: Conrad DeQuadros of RDQ Economics.

MATHISEN: And when it comes to summer travel, gasoline prices always the wild card. Will prices at the pump have an impact and if you are hitting the road, where are the best deals? We`ll take a look.

But, first, some of the business leaders of the day shared their wisdom with the leaders of tomorrow.


JANET YELLEN, FEDERAL RESERVE CHAIR: Finding the right path in life more often than not involves missteps. My Federal Reserve colleagues and I experienced this as we struggle to address a financial and economic crisis.
I learned the lesson during this period that ones` response to an inevitable setback matters as much as the balance of victories and defeats.

SUSAN WOJCICKI, YOUTUBE CEO: I guarantee you, you will change course, go backwards, spring forward, bounce sideways. Some of you will need to adjust the plans that you currently have because they will turn out to be the wrong fit. Some of will you start a business. You have no idea right now what the world means. Some of you will fall in love and move happily across the world. Some of you could open a cupcake shop. Thank you in advance to those people.


MATHISEN: Summer driving season is under way and if you were one of the tens and millions on the road over the past holiday weekend, you know how much more expensive your trip was when you filled up your gas tank.

But as Jackie DeAngelis tells us this might just be the beginning.


The pools are opened, the grills are getting fired up and AAA says that more than 30 million drivers are getting ready to hit the road, because summer is finally here. But road trips aren`t free. AAA also reports that the national average for a gallon of regular gasoline is currently about $3.65.

JEFF KILBURG, KKIM FINANCIAL FOUNDER & CEO: We`re seeing gas prices so high right now, due to seasonality. This Memorial Day weekend, we saw
36.1 million travelers, a little bit of an uptick in the highest record of travelers in the post-recession period. But right now, you see gas stations that tend to mark those prices higher, a lot faster than they bring them down.

DEANGELIS: Most analysts say that Memorial Day is only the start of the summer driving season. Demand for gasoline usually peaks around the Fourth of July. Is there more pain ahead?

KILBURG: We do not see the gas prices going down due to the elevated crude prices.

DEANGELIS: Some states are seeing cheaper retail gas prices than others. says some of the cheapest gas in the U.S. can be found in Arkansas, roughly $3.35. In Hawaii, however, with gas around $4.35, it may be cheaper to ride a surf board rather than a car.

(on camera): High crude oil prices also contribute to pain at the pump, with crude sitting above $100 a barrel, expecting any relief any time soon could be wishful thinking.

KILBURG: Even though we had a little bit of a grab in the inventory numbers last week, I think the supply is still there. We should see relief towards the end of summer.

DEANGELIS (on camera): When higher gas prices hit consumers, they also impact economy. If you`re spending more on gas, you`re probably cutting back on other things.

KILBURG: The consumers are a little bit tentative and that is a trickle down effect in the economy. So, it`s higher gas prices is like a tax and no one welcomes here in the United States.



GHARIB: Higher gas prices can sometimes change the travel behavior.
If that turns out to be the case, it could be a drag on the economy.

Phil LeBeau tried to find out if Americans will ignore the prices at the pump and what it means for summer travel.


PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is what we`ve been waiting for — warmer temps, blue skies, and a chance to kick off summer with a trip.

MARSHALL DONEY, AAA COO: Six hundred thousand more Americans will travel this Memorial Day season. That represents 36.1 million people hitting the roads, taking to the skies, filling cruise cabins and riding rails and buses.

LEBEAU: As is usually the case, most people making a trip this weekend will be driving. The good news? Gas prices average about $3.65 a gallon, roughly in line with where they were last year.

The bad news? Prices at the pump may edge higher as we head into the summer.

UNDENTIFIED MALE: You know, we`re planning a vacation regardless of the $20, $30 extra in the trip there and the trip back. So, maybe it`s $100. You know, it`s not going to affect our plans.

UNIDENTIFIED MALE: If it`s lower, yes, absolutely. I`ll travel a lot more.

LEBEAU: Overall, the higher gas prices are not expected to change summer travel plans, but if the national average shoots up to over $4 a gallon, watch for Americans to start howling.

DAN DICKER, MERCBLOC PRESIDENT: Four dollars seems to be the point in which most economist and I feel there is a negative, or true negative effect on the rest of the economy where a lot of money, consumer money that used to go in other places is now going for gasoline.

LEBEAU: Perhaps the best news this Memorial Day will be for those flying. After a winter filled with record cancellations, the airlines are expecting a smoother summer. Despite airfares, hotel rates and car rental cost all rising 1 percent to 6 percent, the number of people flying is expected to increase to 2.6 million.

DONEY: The number of travelers this year is 2.4 percent greater than the rolling 10-year average in terms of memorial holiday travelers. So this is a particularly high uptick. It`s the second highest level of Memorial Day travelers since the year 2000.

LEBEAU: Meaning a busy weekend on the highways and airports around America.



MATHISEN: Well, whether you`re traveling by car or plane, you`ll want to know where to go.

And here to tell us about some of the best places to visit this summer is Mark Orwoll. He`s international editor at “Travel & Leisure” magazine.

But, Mark, I know you well enough to know that you don`t just do international stuff. You know the U.S. very as well.


MATHISEN: Happy summer, Mark.

ORWOLL: Happy summer. Thank you very much.

MATHISEN: Is traveling going to be a lot more expensive this year, a little more expensive, what?

ORWOLL: I would say a little more expensive. Some of the hotels are going to be up, you know, 3 percent to 5 percent depending on where you`re going to go. Airfares, people saying 2 percent to 6 percent. How that translates into your summer travel budget depends on your family.

But generally speaking, it`s not going to be enough to hinder travel and a lot of people want to get out there anyway.

GHARIB: All right. So, it`s already Memorial Day weekend and so if you want to go, let`s say, to Europe, some of the capitals, Rome, Paris, London, is it too late to get a good deal?

ORWOLL: Not too late, no. If you want to — especially if you want to book towards the end of summer. You`re probably in a pretty good pocket right now to book your trip. Timing can be everything. So, what you`re going to want to do is check airfares day after day, use all of the Web sites and apps at your disposal.

MATHISEN: Are there places that are off the beaten path? Susie mentioned the great cities of Europe. That off the beaten path are interesting, maybe represents bargains that are either in our hemisphere or anywhere?

ORWOLL: Absolutely. There are some places that are off the charts right now that are going to be big. I think, for example, Nicaragua, people are calling it the new Costa Rica. And yet, prices are half of what you`re going to find in Costa Rica.

Ecuador, this is one of the most fabulous family-friendly destinations, especially if your kids are old enough to appreciate things like side trips to the Galapagos Islands.

I also want to mention the Azores, these are group of islands, an autonomous region of Portugal. It`s sophisticated, great food, wonderful beaches. Only a four-hour flight from Boston. And great bargains.

GHARIB: Mark, do you need a travel agent to get the best bargains or are you better off doing it yourself?

ORWOLL: I always like to do my own research but never hesitate to go to a travel agent. I booked a cruise for my family who went through a travel agent but they often can get you discounts that you can`t find anywhere else and they will almost always be able to give you great travel planning advice.

MATHISEN: Have the cruise lines had to reduce prices to lure travelers back? Because, of course, they`ve had some notable publicity problems with illnesses and breakdowns.

ORWOLL: Right. In general, the cruise lines have not had to reduce their prices. In fact, they have been inching upwards for a number of years. The old days when you could get a cruise cabin for $50 a night, those days are gone. You`re actually paying a good value, you`re getting a good value. But the cruise lines aren`t having to reduce their rates, no.

GHARIB: Give your best advice for a family of four. You know, the parents and two kids, 8, 10, 12 and they want to do something in the United States and don`t want to break the bank and have a good vacation.

ORWOLL: I`ve got a great idea. I`ve done this with my family, on my occasions. We like to go to a big city on the weekends. We`ve done to Philadelphia, we`ve done Boston, we`ve done Los Angeles.

The thing is, the business travelers are gone and the hotels are desperate to fill the rooms, oftentimes at rock bottom prices. Plus, you have fewer crowds and you`re still going to be able to enjoy the museums, all the restaurants, the zoos, gardens, all of the amenities that most big cities have.

MATHISEN: Great place for kids is my hometown of Washington, D.C. On a weekend, so many and all of the museums, the Smithsonians, Mark, are free. It`s beautiful.

ORWOLL: You know, again, I`ve done that with my family. It is one of our favorite destinations.

So, don`t neglect the big city that you can drive to. It`s a great way to save money and have a terrific family vacation.

MATHISEN: Colonial (INAUDIBLE) — but it`s hot. It`s hot.

ORWOLL: Yes, it`s true.

MATHISEN: Thanks very much.

ORWOLL: All right. Thank you both.

MATHISEN: Mark Orwoll of “Travel & Leisure” magazine.

GHARIB: Up next, expensive eats. Why anyone who is the king of the grill might not want to look at their grocery bill. We`ll explain.

But, first, more commencement speeches from top business leaders.


SHERYL SANDBERG, FACEBOOK COO: Your career and your life is going to have start and stop, zigs and zags, twists and turns. That`s especially true in our economy, which is a really tough one. Take full advantage of every opportunity you get to develop your skills.

Each of us find our own way on our own time. You may not love every job you have but you can learn from every job you have.

JACK LEW, TREASURY SECRETARY: I know public service is in your DNA.
People with your training, your values, and your talents do not fall into line. They chart their own course. They take the unbeaten path. They follow their inner compass. I know this will be true for you.


GHARIB: Memorial weekend also officially means it`s the summer of blockbuster season. The movies have a lot riding on the next few months.
It`s a time that brings in almost half of Hollywood`s revenue.

Morgan Brennan looks at what Tinseltown is hanging its hat on this summer.


Superheroes: monsters and apocalypses. That`s what you can expect to watch at the box office this summer, starting with “Godzilla.” The $160 million remake distributed by Warner Brothers debuted in theaters to major fan buzz earlier this month.

DAVE KARGER, FANDANGO: Like most that end with a number in the title are going to be the ones that do the best. So, it`s really a summer that`s dominated by sequels, comic book movies, prequels, superhero movies, that`s what the core movie fans really seem to want.

BRENNAN (on camera): So far this year, U.S. ticket sales are up about
5 percent to $3.5 billion. That bodes well going into the busy summer season. May through August typically accounts for almost half of almost all of U.S. box revenue each year.

Last summer broke records, thanks to hits like Universal`s “Despicable Me” sequel and Marvel`s “Iron Man 3” for Disney (NYSE:DIS).

(voice-over): This season, expect even more Marvel characters on movie theater marquises, starting with the new “X-Men” installment which open just in time for Memorial Day. Disney (NYSE:DIS) acquired Marvel in
2009 but it doesn`t actually own the movie rights to all of the comic book franchises. 21st Century Fox has “X-Men”, and Sony (NYSE:SNE), “The Amazing Spider-Man” sequel, which has already grossed more than $150 million domestically.

But that hasn`t hindered Disney (NYSE:DIS), its “Captain America”
sequel broke April box office records, and in August, it has Marvel`s “Guardians of the Galaxy.” Later this month, “Maleficent,” a live action twist on “Sleeping Beauty”.

DANIEL LORIA, BOXOFFICE.OM OVERSEAS EDITOR: The expectations are high. We`re coming off, obviously, a record high year. I don`t think it`s going to be as predictable as previous years have been because you see the sort of offbeat different pulse (ph) coming in from studios this year.

BRENNAN: But the summer season would not be complete without mentioning Viacom (NYSE:VIA). In August, its Nickelodeon Studios will put out “Teenage Mutant Ninja Turtles”, a franchise that already enjoys huge success licensing toys.

And then there`s “Transformers”, the fourth installment expected to be the biggest money maker both here and in China, where the reality show is used to cast certain roles cast for the movie. The last one grossed more than $1 billion worldwide and this one is expected to do just as well.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in Los Angeles.


MATHISEN: And finally tonight, nothing says summer quite like a good barbecue and Memorial Day is the second most popular day for a cookout trailing only July 4th. The hot dogs and sizzling steaks and spareribs, what is not to love? The more you love about the grill, the more likely you`re going to find you`re suffering from sticker shock.

Bill Griffeth explains.


It`s that time of year again where friends and family gather for the traditional Memorial Day barbecue. But a sharp rise in beef prices may be hard to stomach if you`re the one paying for the meat, that is.

DICK RHOADS, GREEN ACRES MEATS: The last load of beef I got in, believe it or not, was the same cut, same quantity as before and the last load I got in was $6,000 more than it was the delivery before.

GRIFFETH: That`s Dick Rhoads, the owner of Green Acres Meats in Simi Valley, California. Some cuts of his store are now going for upwards of
$23 a pound. And he said the popular rib eye steak is about $15 a pound or about $2 more than a year ago.

RHOADS: Sticker shock, let`s call them that.

GRIFFETH: David Maloni, the economist for the American Restaurant Association, said high prices are the new norm and it could be that way for a while.

DAVID MALONI, AMERICAN RESTAUTRANT ASSN. ECONOMIST: Retail beef prices in April were a record high, up 11 percent year on year and we suspect more records are going to be set in the coming months.

GRIFFETH: What`s the reason? Texas, the nation`s largest producing state is in the fourth year of a devastating drought and another top five cattle-producing state, California, is in a record drought of its own.

As a result, the USDA says the national cattle herd is at the lowest level since the early 1950s.

RHOADS: It`s the biggest shortage that I`ve ever seen. I`ve been in the business now — I hate to say it, but I`ve been in the business for 50
(ph) years.

GRIFFETH: But meat isn`t the only thing in short supply. The nation`s pork supply is also tight because of the deadly PEDV virus. The USDA estimates as many as 7 million pigs have died. That`s about a tenth of the total U.S. population.

As a result, pork prices are also up over the past year, but it isn`t all bad news at the barbecue. The American Restaurant Association says there are signs of consumer pushback from high prices and that chicken could be the big winner.

RHOADS: I sell a lot of chicken kabobs.



GHARIB: Is your mouth watering?

MATHISEN: It looks really good. You know, I`d just say, eat smaller portions, good for the budget, good for the waistline. I probably don`t live by that, but —

GHARIB: We just grill all summer long.

MATHISEN: Love it.

GHARIB: So much fun. I don`t care. It`s a little more expensive.

That`s it for this special Memorial Day edition of NIGHTLY BUSINESS REPORT. I`m Susie Gharib. Thanks so much for watching.

MATHISEN: And thanks from me as well. I`m Tyler Mathisen. Have a great evening, everybody. And we`ll see you here tomorrow night.


Nightly Business Report transcripts and video are available on-line post broadcast at The program is transcribed by CQRC Transcriptions, LLC. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2014 CNBC, Inc.

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