Transcript: Friday, September 5, 2014

NBR ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Susie Gharib.

economy adds jobs in August but nearly 100,000 fewer than forecast. What
the numbers mean for the economy, the Fed, and investors like you.

Alibaba sets the price range for the initial public offering, opening the
door for what could be the biggest IPO in U.S. history.

MATHISEN: And top picks. Stocks that pay you to own them. Three
blue chip names to buy now.

All that and more tonight on NIGHTLY BUSINESS REPORT for Friday,
September 5th.

GHARIB: Good evening, everyone.

Disappointing news about the job market today, but investors shrugged
it off and stocks ended higher with the S&P index closing at the new
record. American businesses added only 142,000 jobs in August. Now,
that`s not a bad number, but it`s much lower than expected and July`s
numbers were revised lower by 30,000.

Despite that, the nation`s unemployment rate kicked a notch lower to
6.1 percent because so many Americans gave up even looking for a job.

So, what happened? Where did the jobs go?

And after six months of strong gains and a string of encouraging data
about the economy, do these numbers even make sense?

Hampton Pearson has more.


The retail sector with a net loss of 8,000 jobs led the way in the
unexpected August slow down in hiring. The sector`s weakness was largely
cost by 17,000 workers temporary out of work due to the strike at the New
England grocery store chain Market Basket. The overall weak number broke a
sixth-month streak of employers adding more than 200,000 jobs to the

Leading economists and government officials say the numbers don`t make
sense when compared with recent trends like strong auto sales boosting GDP
growth and consumer confidence and jobless claims falling.

MARK ZANDI, MOODY`S ANALYTICS: I don`t believe it. I don`t believe
this data. No, it`s not consistent with anything, anything. It`s not
consistent with ISM. It`s not consistent with ADP. It`s not consistent
with unemployment insurance claims.

THOMAS PEREZ, LABOR SECRETARY: When you look at one month. And when
you look at the trend data of the last three months is over 200,000. The
last year, we`re averaging very solid gains.

PEARSON: The unemployment rate fell to 6.1 percent, but that`s
because some 2 million people stopped looking for work last month and were
not counted as unemployed. However, at 4.7million, job openings are at a
13-year high, another reason leading economists are skeptical about the
latest government data.

ZANDI: Job openings I think growing (ph) very dramatically. And now,
the number of open positions are back to where they were pre-recession.

PEARSON: August job growth leaders include professional and business
services, adding 47,000 jobs last month, and a total of 639,000 new workers
in the last year, and a strong summer rebound and vacation travel continues
to boost new jobs in the hospitality sector. Hotels and restaurants hired
another 22,000 workers in August, nearly 290,000 in the last year.

coming off 52 straight months of job growth. This past month showed 22,000
new jobs created and, really, that`s driven because of greater leisure
travel, both domestically and internationally here to the U.S.

PEARSON: Today`s slow down in job growth may temporarily stall the
debate over wage growth and the timing of the Fed`s next move on interest

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


MATHISEN: Thirty-three and counting. That is the number of times the
S&P 500 had closed at a record high this year. And today, despite that
soggy job`s news was another of those days.

Stocks rebounded from early loses, finished at session highs and this
marks the fifth consecutive week of gains for the major market barometers
we follow here for you. Now, at the close, the Dow was up 67, the NASDAQ
ahead by 20 and S&P added 10 to reach that all-time closing high of 2007.

For the week, all three of those indexes had marginal gains.

GHARIB: Joining us now to talk more about today`s jobs report and
what it says about the health of the U.S. economy: Steven Wieting, he`s
global chief strategist with city private bank; and Kevin Cummins
(NYSE:CMI), senior economist at UBS.

And, Steven and Kevin, thank you so much for joining us.

Steven, let me begin with you. You heard our report. What is the
message of this employment news today? Is it a fluke? Is the number of
fluke or something more serious going on? What do you think?

think the sad truth is the U.S., most large economies, can`t measure what
employment will do on a month to month basis. These are statistical
samples that are extrapolated and then you heavily manipulate them with
seasonal adjustment.

What is meaningful from this report is that, you know, back in 2008,
we had 155 million people available to look for work or working. Today, we
have 156 million.

The unemployment rate has fallen from 10 percent to 6 percent as you
heard earlier on in the program, unfilled job openings are now the highest
level since 2001, yet the U.S. labor force really hasn`t budged. We have
been tightening labor markets at rather moderate or slow GDP growth rates
and that`s suggesting future limits. We should not be expecting a big
acceleration in employment growth for what is strong now going on a fourth

MATHISEN: So, Kevin, let me pick up on something Steven just
mentioned, and that is unfilled job openings at a high level. Is it
because we don`t have enough skilled workers to fill those jobs? What
gives here?

KEVIN CUMMINS, UBS SENIOR ECONOMIST: Yes, well, the labor market, I
take a little more of an optimistic outlook for the U.S. economy in that
we`re creating over 200,000 jobs a month. So far this year, you averaged
215,000 jobs. That`s going to continue to push the unemployment rate

Admittedly, some of the drop in the unemployment rate reflects those
dropping out of the labor force, but as the labor market has picked up some
momentum this year, you`re likely to see a little bit of a pickup in the
number of people coming back into the labor force, so that you really
probably going to stabilize going forward from your labor force
participation rate.

The sort of job growth that we`re getting is going to put more than
enough downward pressure on the unemployment rate, where you start to see a
pickup in wages and that`s one of the missing ingredients here that you
touched on in your earlier spot. And I think that`s going to likely help
the consumer and get GDP growth going more towards 3 percent going forward
and back away from the 2 percent that we`ve had so far in the recovery.

GHARIB: Well, I`d like to pick up on the 3 percent GDP growth.

Steven, let me ask you this. I mean, a lot of people think 3 percent
now, maybe it will go higher. There`s going to be a real pickup. The
economy is just going to take off and with it, the stock market.

Is that how you see it? Is this kind of a new speed limit for the

WIETING: Well, I think we can have a 3 percent GDP growth in the
coming year. We can certainly do a lot better than this first half average
with the negative first quarter and 1 percent. But the idea that there is
a recovery that`s still ahead of us, that we haven`t already been quite
deep into, I think is a mistake. I think if you look at labor markets, the
pace of declines, the trajectory of declines in the unemployment rate, has
been suggesting that the economy has already been growing about trend for

So, you don`t, for example, shouldn`t expect employment to go from a
200,000 monthly pace or a little above that as we`ve seen over the past 12
months to a 300,000 number or some tremendous gain from there. We`re
already there. This is what a recovery looks like.

MATHISEN: So, Kevin, what do you think the normal rate of growth for
the U.S. economy will be over the next decade or so?

CUMMINS: Well, there`s been a lot of discussion here and it`s an
active debate and there is a lot of variables that are difficult to
forecast to make that assumption about potential GDP growth. And I can
sympathize with the idea that it`s come down some.

But I think a lot of the kind of doomsayers, I think that`s a bit
backward looking. If you think about it more recently, you`ve had a
massive fiscal tightening, that`s not something that will happen going

MATHISEN: Is it closer to 3 percent or closer to 2 percent, Kevin?

CUMMINS: I`d argue closer to 3 percent, yes.

GHARIB: Steven, let me —

CUMMINS: And the other part was the deleveraging, the consumer is
deleveraged and I think we`re back at a spot if you look at debt to income
ratios in a healthy position now. You`d have a higher savings rate.

GHARIB: I`m sorry I cut you off. I want to get one last comment from
Steven before we wrap this up.

You kind of worry me with your outlook of what`s going on. So, as an
investor, I`m sort of wondering, what do I do with my money and how do I
protect myself? What are you telling your clients over at Citi?

WIETING: You know, I would be aware. Right now, I think we are well-
cyclical positioned. Again, there is no obstacles to growth within the
coming year. We`re over-weight equities in moderately under-weight fixed
income. We`re over-weight credit and preferred that over the rate market.

But I think our asset allocation, we should just not assume that this
sort of thing can stay here, that three years from now, there may be
meaningful limits to the U.S. recovery. If you think about what has slowed
the labor force, there`s been nothing from the demographic side that is
already effectively slowed the labor force. I`ve been an optimist since
2009 and waiting for a long time for that labor force`s recovery.

GHARIB: All right. It`s a conversation we would love to continue.
Lots to talk about.

Thank you so much, gentlemen. Steven Wieting with Citi Private Bank
and Kevin Cummins (NYSE:CMI) with UBS — thanks so much.

MATHISEN: Overall job growth may have slowed last month, but hiring
in the maritime industry is speeding up and there is a rush to bring in new
blood into the ancient profession as it faces a potentially crippling
shortage of skilled workers.

Mary Thompson takes a look at where the jobs are from the port of Los
Angeles and long beach.


Global trade is on the rise, good news for companies like Crowley Maritime,
a 122-year-old family owned firm, operating 200 vessels around the world.

THOMAS CROWLEY, CROWLEY MARITIME: Our plans are to hire between 500
and 600 maritime workers over the next five years.

THOMPSON: The challenge for the company CEO Tom Crowley, finding
those workers, especially officers. Why? Competition for their talent is
global. Many officers are nearing retirement age and new regulations mean
more training and time on the water for their replacements.

(on camera): Just how big is the problem? Well, a 2010 report by the
International Maritime Organization forecasting the industry should be
short to 27,000 to 46,000 ships officers in a few years.

(on camera): To fill its void (ph), Crowley recruits newly minted
officers from the maritime academies and works with a union. The union`s
monitor retirements and make sure there are enough hands ready to work on

every job every time. In a realistic world, what would you like to have, 2
1/2 people.

THOMPSON: Thirty-year-old Martin McDonald is in a union-run training
program. For three months, he`s schooled in the basics of the maritime
industry, fire-fighting, life-saving and navigation. This will land him on
a low rung, where he can start to assent the ship`s ladder.

MARTIN MCDONALD, APPRENTICE: I want my ownership by 50. That`s my

THOMPSON: For 12 years, Steve Peckham has been a captain leaving
architectural engineering for the wide range of jobs the maritime industry

STEVE PACKHAM, SHIP CAPTAIN: There is a ton of different
opportunities today. You can do construction towing. You can do ship
work. You can do ship assist work. You can work on an oil rig.

I mean, there is a bunch of different opportunities. So, yes, you`re
a mariner, it`s kind of like being a doctor. There is a million different
kinds of doctors you can be.

THOMPSON: And you can do those things earning a decent wage.
McDonald could earn up to $40,000 his first year, a captain earns six

MCDONALD: I`ve done military. I`ve done retail. I`ve done IT. But
this is — this is my last go at it and I think this is going to be where
I`m going to fit in the most.

THOMPSON: A career that is fit for the long haul.

For NIGHTLY BUSINESS REPORT, I`m Mary Thompson at the port of Los
Angeles, Long Beach.


GHARIB: European Union officials have agreed to a new round of
sanctions against Russia. They are expected to be imposed early next week.
This common sense after world leaders wrapped up a two-day NATO summit
today, where Russia was on the docket.

Hadley Gamble has more from Wales.


of key takeaways from the close of the NATO summit here in south Wales,
alliance members coming together, finding a consensus on what to do in
terms of Russian aggression that decided on going ahead with this rapid
response force, much talked about in recent days. They are calling it
spearhead force. It has a land, air, sea component as well. It`s going to
be based in Poland and it`s going to reassure the eastern European states
the NATO alliance is there for them in terms of security.

patrol wills continue. Rotations of additional forces throughout Eastern
Europe for training and exercises will continue. Naval patrols in the
Black Sea will continue. And all 28 NATO nations agree to contribute to
all of these measures.

GAMBLE: Now also, they have been discussing what to do about the
threat from Islamic terrorists, Islamic States, major concern for many of
these European countries, as well as the United States. They formed a
major coalition of the willing essentially, they say they want to tackle
the Islamic State, but we have yet to hear a clear plan or strategy in
terms of how they`re going to do that and essentially the U.S. secretary of
state has set a red line for all of these countries is going to be putting
boots on the ground. Nobody wants to do that.

Also, some homework for the Europeans in terms of their defense
spending. A lot of buzz around here about, you know, are they going to
pony up? Are they going to begin to fund their own security?

So, a 10-year period where the Europeans will be able to meet that 2
percent military spending in terms of GDP is a non-binding resolution.
We`ll just have to wait and see if they meet that benchmark.

For NIGHTLY BUSINESS REPORT, I`m Hadley Gamble in Newport


MATHISEN: Coming up, three blue chip buys that pay you handsomely to
hold them.


GHARIB: New details on what is expected to be Wall Street`s biggest
initial stock offering ever. According to regulatory filing, shares of
Alibaba, this is the Chinese e-commerce and social networking giant, will
begin trading on the New York Stock Exchange two weeks from today,
September 19th. Three hundred twenty million shares will be made available
for sale to the public, priced in a range of $60 to $66 a piece, raising
more than $21 billion in that IPO.

Now, that tops Visa`s record $17 billion IPO back in 2008, and that
could value Alibaba at a staggering $163 billion. To put that in
perspective, it`s way more than what the Walt Disney (NYSE:DIS) Company is

Yahoo (NASDAQ:YHOO), which owns nearly a quarter of Alibaba, could net
as much as $8 billion by selling a portion of what it owns in the IPO.
Yahoo (NASDAQ:YHOO) shares rose 1 percent on today`s news.

MATHISEN: Gilead Sciences (NASDAQ:GILD) is reportedly close to making
a generic version of its $84,000 drug, and that is where we begin tonight`s
“Market Focus”.

The drug called Sovaldi cures about 90 percent of patients with
hepatitis C who take it, but its high cost has stirred controversy. The
company is said to be close to a licensing deal that would allow a lower
cost version of the drug to be sold in about 80 developing countries, but
not here in the U.S. That sent shares down almost 1 1/2 percent to

Well, they say loose lips sink ships — well, Tesla shares took a hit
today after the company`s CEO Elon Musk was maybe a little too honest about
his company`s stock price.


ELON MUSK, TESLA CEO: I do think people sometimes get carried away
with our stock, you know, honestly. And, you know, I think our stock price
is kind of high right now, to be totally honest. Or, rather, let me put it
this way — if you care about the long-term Tesla, I think the stock is a
good price. If you look at the short term, it`s less clear.


MATHISEN: Do you see the guys around him squirming there when he did
that? All right. Musk made those comments after announcing Nevada as the
location of the company`s $5 billion battery factory, which we told you
about right here last night. Those comments helped sent the stock down 3
percent to $277.39.

Shares of Dollar General (NYSE:DG) off after Family Dollar rejected
its sweetened $9 billion bid, citing antitrust concerns. Instead the chain
is sticking with its $8.5 billion offer to be acquired by smaller rival
Dollar Tree (NASDAQ:DLTR). Dollar Tree (NASDAQ:DLTR) was the only of the
tree to end higher.

GHARIB: Michael Kors` largest shareholder is selling its entire stake
in the luxury retailer and the news pushed shares lower. Two of the
company`s board members will sell their combined 5.7 percent stake and step
down from the board. Shares were off 4 1/2 percent to $76.39.

Also a down day for another retailer: Gap (NYSE:GPS). It reported a 2
percent drop in August sales, missing forecasts. Its Old Navy unit posted
a strong increase in sales, but that didn`t reassure investors. Shares
fell 4 percent to $44.65.

And Priceline declined after Evercore cut its rating on the stock.
The firm downgraded the travel booking sit to “equal weight” and cut its
price target by $100 based on concerns about competition from Google
(NASDAQ:GOOG). Shares fell two percent to $1,195.

MATHISEN: Our market monitor tonight is a classic stock picker who
likes companies that put shareholders first. He`s Ed Perks, portfolio
manager for the $97 billion Franklin Income Fund, part of Franklin
Templeton, up 9.5 percent so far this year.

Ed, welcome. Good to have you with us.

You like companies that return capital to shareholders and your first
pick tonight has a 4.7 percent very lush dividend. It`s Royal Dutch Shell.
Tell me about it.

one of our top holdings in Franklin Income Fund and really, it`s about
expectations that have existed for that company and management turnover.
The new CEO of Royal Dutch Shell, Ben van Beurden, been on the job about
six months and actually made some nice progress already, really focusing on
capital allocation and improving free cash flow, importantly, we think a
lot of that will benefit shareholders in the form of dividends going

GHARIB: You also like, Ed, Intel (NASDAQ:INTC) which has a big
dividend. Tell us more why investors should pay $35 a share for Intel

PERKS: Yes, you know, Intel (NASDAQ:INTC) is an interesting example.
It`s partially a company that`s been revalued and rerated by the market.
It started this year really out of favor. I think people were really
concerned about the overall outlook for the PC market and the companies
really delivered, shown better performance in their core businesses, and
data centers.

Over 80 percent of revenues in Intel (NASDAQ:INTC), that`s been
working, and importantly, we`ve seen some signs that some important growth
markets like mobile and tablets, the company is starting to perform better
there, as well. Incredibly strong balance sheet and a company focused on
delivering that to shareholders.

So, even though we`ve seen nice performance from Intel (NASDAQ:INTC),
we think it can continue to perform well, trades at a discount to the
overall market and really has that a nice profile.

MATHISEN: And your final pick pays 4 1/2 percent just to own. It`s
Verizon (NYSE:VZ).

PERKS: Yes, you know, this is on the other end of the spectrum, a
stock that`s actually underperformed in the broader market.

But when we look at Verizon (NYSE:VZ), you know, we see not just that
attractive dividend yield but a company that just this week also increased
its dividend. I think the eighth consecutive year where they increase the
annual dividend, and a company that we think is really in a tremendous
position in the wireless business in the U.S. They have shown continued
strength there, not just in revenue growth, but also maintaining a very
high margin and that`s really driving profitability and that`s going to
continue to benefit Verizon (NYSE:VZ).

MATHISEN: All right. Ed, thank you very much for being with us
tonight. Have a great weekend. We appreciate your perspectives.

PERKS: It`s good to be with you.

MATHISEN: All right. Ed Perks is a portfolio manager for the
Franklin Income Fund.

GHARIB: And coming up next, you`ve heard all about them and probably
seen them buzzing overhead, drones. We`ll introduce you to one guy who`s
flying high and making money from them. That`s next.


MATHISEN: On this job`s Friday, a story about a former marine in
Southern (NYSE:SO) California who is making and selling drones for a
living. An FAA ban put commercial drone use in a murky gray area,
requiring special permission until rules are formalized, which might not
happen until next year, but making and selling them — well, that`s another
story and it is our latest bright idea.


MATHISEN (voice-over): It sounds like a swarm of bees or your
neighbor`s leaf blower, but it`s not. It`s a drone, and the noise it makes
is music to Patrick Smith`s ears.

Smith liked to fly radio controlled planes when he was a kid. After a
stint in the Marine Corps, he tried selling vacuums among other things. On
a whim, he mixed photography with his passion for flying machines back in

GoPro and put it on an airplane. When I landed and reviewed the footage, I
was blown away, and I was like, this is aerial photography without having
to hire or pay for a real airplane.

MATHISEN: The military has been using unmanned aircraft or drones for
years, and you`ve heard about the big guns Google (NASDAQ:GOOG) and Amazon
(NASDAQ:AMZN) looking to use them for same day deliveries. But Smith has
been building and selling unmanned copters as he calls them since 2009,
providing bird`s eye views of surfers, glaciers, street scenes, cityscapes,
motor cross and he`s even shot music videos.

To say Smith`s business Aerial Media Pros has taken off isn`t just a
cliche, it`s an understatement.

SMITH: We`re projecting 2017 to break $100 million in sales and there
is no reason why this couldn`t be a billion dollars company.

MATHISEN: But Smith`s video was anything but perfect in the

SMITH: It was always shaky and getting vibrations and that was a
constant plague, your tilt and your roll.

MATHISEN: To get past the turbulence, Smith developed a stabilization
system. Now, he can peak above the tree tops and turn on an approach to
get in close. Smith`s high-end copters can cost $20,000 to $30,000 a
piece, a pittance for Hollywood producers used to paying $5,000 to $10,000
an hour to rent choppers and airplanes.

TONACI TRAN, TONACI DIGITAL OWNER: Now, it`s able to you can adjust
and keep the camera at the right horizon.

MATHISEN: Tonaci Tran is a professional photographer who trusts
Smith`s higher end equipment to carry his gear.

TRAN: We have literally about $50,000 or $60,000 floating in the air.
This would allow us to provide services that would normally require a big

MATHISEN: Smith`s lower-end helicopters which can be had for as
little as $700 are attracting an even wider range of commercial customers.

SMITH: Some people use them to check their duck blinds out in Texas,
agriculture is a good use, search and rescue, people are doing like lots of
real estate.

MATHISEN: The company`s growth has Smith hiring other military vets
like Brandon Woloschek. In less than six months, he`s gone from technician
to sales manager.

BRANDON WOLOSCHEK, EMPLOYEE: In the military, I mean, you have all
sorts of different people coming from all backgrounds. You learn how to
deal with people really well, not only do you get really good work ethic.
You also get, you know, the aspect of having a real versatile person to the

MATHISEN: And while Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN) and
others wait for the government to regulate unmanned commercial flights,
Smith is actually looking forward to it.

SMITH: We don`t want to have 20,000 of these up in the air. So I
think the guidelines coming down will be helpful.

MATHISEN: Plenty of potential investors have reached out to Smith but
he`s not looking for financial help right now because he sees nothing but
opportunity on the horizon.

SMITH: If we can branch out into the government sector and starts
supplying the copters to them, I think that`s going to propel us even
farther and faster, but it`s also going to give us an edge on helping serve
the community.


MATHISEN: Smith says he`s bringing in more than $700,000 a month.
Right now, his client list includes NASA, Google (NASDAQ:GOOG), which is
updating its maps, and even Elon Musk`s Space X.

Studios are still shooting features and several films Smith worked on
are due out over the next few months. It was very interesting that how
much cheaper the use of the drones is for a Hollywood filmmaker to use a
helicopter. I remember seeing some videos of the Napa earthquake a few
weeks ago, shot of the damage that is shot by drones. It was the best view
you could see.

GHARIB: The coolest things. I haven`t seen them, but I think we`ll
be seeing more of them.

MATHISEN: All right. That will do it for NIGHTLY BUSINESS REPORT for
tonight and for this week. Thanks for watching, everybody. I`m Tyler

GHARIB: And I`m Susie Gharib. Have a great weekend, everyone. Tyler
and I will see you back here on Monday 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.

This entry was posted in Transcripts. Bookmark the permalink.

Leave a Reply