Transcript: Friday, October 3, 2014

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

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SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Hiring surge. The unemployment rate falls below 6 percent for the first time since 2008. So, why have wages hardly budged? And is that about to change?

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Burst of buying.
Investors like what they saw on the jobs report. The blue chip Dow index gained more than 200 points, which it hasn`t done since March.

GHARIB: Market monitor. Our guest tonight is recommending stock that he says will do well if the economy and labor markets improve.

We have all that and more tonight on NIGHTLY BUSINESS REPORT for Friday, October 3rd.

Good evening, everyone, and welcome.

Nearly a quarter million jobs were added to the U.S. economy last month and that clear sign of sustainable growth sent stocks sprinting higher today.

Here are the numbers from the Labor Department. The economy added
248,000 jobs in September, up from 180,000 in August, the number that itself was revised higher today. The nation`s unemployment rate fell to its lowest level since July of 2008, edging down two notches to 5.9 percent.

On Wall Street, the Dow shot up 209 points. Its first 200-plus point move to the upside since March, and enough to close back above 17,000.
NASDAQ up 45. S&P 500 added 21, its best day in several months.

Now, the jobs data pushed the U.S. dollar index to a fresh four-year high, and that sent the price of gold, among other things, sharply lower, dipping below $1,200 an ounce for the first time this year. And crude oil closed below 90 bucks a barrel for the first time in a year and a half.

Wrapping up the past five sessions though, the major stock averages ended lower for the second straight week, all three indexes were down more than a half percent.

Hampton Pearson now takes a closer look behind those latest job numbers.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Much to the relief of both Wall Street and Main Street, job growth rebounded sharply in September, from the disappointing 142,000 payroll number for August. The Labor Department says that job gains for the last three months averaged 224,000 when you include upward revisions for July and August.

And the headline unemployment rate is now 5.9 percent, the lowest since the summer of 2008.

BRIAN WESBURY, FIRST TRUST ADVISORS: The unemployment rate now below
6 percent. When you combine that with initial unemployment claims, below
300,000 solidly, what it says is that the labor force is getting to that point where it`s what we would call full employment. And that means that wages are going to start increasing more rapidly in the months and quarters ahead.

PEARSON: Wage growth, however, was flat in September and up just 2 percent over the last year. But paychecks got bigger because people worked longer hours and recent data shows some of that money is getting spent.
The job gains were broad based, with professional and business sectors leading the way.

And the Labor Department says the creation of more higher-paying jobs is now out-pacing lower wage job growth.

DAVID KELLY, JPMORGAN FUNDS: The labor market is tightening. To me, this is all about the structural versus cyclical debate on labor force participation. And I think that you score one for the structuralists here because we`re seeing the unemployment rate come down, we`re seeing labor force come down, we saw the number of discouraged workers coming down.

PEARSON: McLean, Virginia-based Cvent highlights a good paying job success story. It`s a high tech worldwide planning business that`s in the process of hiring 500 new workers, a 30 percent increase in their workforce this year.

REGGIE AGGARWAL, CVENT FOUNDER & CEO: Our customers tend to sign multi-year contracts. We have commitments for many years. So, we have high confidence, you know, in our revenue for the future years.

PEARSON: Vivian Lorencatto got hired right after graduating from Duke University last summer. Nationwide, job prospects for recent college graduates are improving.

VIVIAN LORENCATTO, CVENT SALES ASSOCIATE I`m always challenged. It`s high energy. It`s young tech company. So, it`s growing. So, all these changes are thrown out at you. And it`s a very fun company to be in.
Everyone looks forward to coming to work.

PEARSON (on camera): The bottom line, according to the Labor Department, every major sector of the economy has seen a net increase in jobs in the last 12 months.

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

(END VIDEOTAPE)

GHARIB: Let`s get more now on today`s jobs report from our two guests. We`ve got John Manley. He`s chief equity strategist at Wells Fargo (NYSE:WFC) Funds. And Mark Zandi, chief economist at Moody`s Analytics.

All right. John, Mark, great to have you with us.

JOHN MANLEY, WELLS FARGO FUNDS: Thank you.

GHARIB: John, let me begin with you because I want to ask you about the stock market. Does this jobs number, the strong jobs number today, erase all the worries we have today about the weak growth in China, Hong Kong protests, problems with the economy and Europe. Does this really change things?

MANLEY: Those are two questions. I don`t think it fixes anything. I think those are still issues out there. But I think it will become less important, I think the key factor the economy is growing.

We`re always — we never know what the future is gong to bring.
Sometimes, we are just more uncertain about it. Those are usually buying opportunities. I think the fundamentals are still good.

MATHISEN: Mark, let`s turn to the question that has been deviling this generally positive jobs numbers all year long and that is the question of the labor force participation rate. Without getting too wonky, it basically says the number of people who are taking part, either looking for a job or have a job, it`s been coming down. But my guess is, that it is partly coming down for reasons that are voluntarily, rather than coercive.
In other words, there are a lot of retirees who are voluntarily stepping out of the job market, and given the pace of jobs growth, people who want a job can probably find something.

MARK ZANDI, MOODY`S ANALYTICS: Well, I think you`re right. I think the principal reason for the decline in participation is retirement. You know, got a lot of baby boomers that are in their late 50s, early 60s, they`re starting to retire. And that`s bringing down participation.

There is other structural forces, the disability insurance program, the Social Security is having an impact. But I also think there is a cyclical element to it.

If you look at the number of people who stepped out of the workforce but say they still want a job, they`re not looking for various reasons.
Maybe the pay is too low. There is not enough job opportunity, that`s still very elevated compared to where it was prior to the recession.

So, I think those workers will come back in, and they will at some point lift labor force participation, and labor force growth, not a lot, a little bit because you still have the retirement effect that will play out over many years. There is still an element of — a cyclical element to the decline in participation. And that should come back in as the labor market continues to improve.

GHARIB: Uh-hmm. Mark, I want to ask you a broader question about the economy. So, we have the unemployment rate below 6 percent, 5.9 percent.
We just heard Brian Wesbury talking about full employment. Oil prices coming down. U.S. dollars getting stronger.

Connect the dots for us. For people at home listening to this — how is the economy doing? Are we really out of the woods? Is everything OK now?

ZANDI: We`re certainly getting out of the woods, Susie. I think we`ve made a lot of progress and the economy is — all the trend lines look really, really good.

We still have a way to go. The unemployment rate is still elevated compared to where it should. We still have people who stepped out of the workforce that need to come back in, and we still have a lot of part-timers out there that would rather full time. So, there is still a lot of slack.

By my calculation, if everything kind of sticks to script, and all signs are good on that front, then by the end of 2016, so, two years from now, that`s when we`ll be back to full employment.

So, we still have — everything looks good, we`re on track, but we still have a way to go before we feel like we`re completely out of the woods.

MATHISEN: John Manley, let me turn to you, today`s rally, was it significant enough in itself? Was it really just a relief or reaction rally or was it the end of something, or the beginning of something?

MANLEY: Well, the market was off 4 percent or 5 percent at its worst.
And it felt much worse than that. I think it is the beginning. I think it is the beginning of a pretty good earnings period that should come at us over the next two or three weeks. I think that puts the market on an upward pace over the very short term. And I still go higher for a year or two before we have real problems.

GHARIB: So, what happens next week, John? Are people going to come back after the weekend and be in the buying mood and continue this? Or are we just going to go the opposite way and have triple digit losses again?

MANLEY: Well, there will be triple digit losses, over the short term things get better. We`re right on top of the earning season, maybe a few days off. And it`s coming at us very quickly. So far, I see no reason to think the numbers won`t be as they`ve been for the last three, four or five quarters, better than people expect and a reason to buy, not sell stocks.

GHARIB: OK. John, Mark, thank you so much. Have a great weekend.
John Manley with Wells Fargo (NYSE:WFC) Funds, Mark Zandi at Moody`s Analytics.

MATHISEN: And while the economic data here in the U.S. is encouraging, that is not the case in Europe.

Michelle Caruso-Cabrera has more.

(BEGIN VIDEOTAPE)

MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT: The good employment data in the United States only highlighting just how bad the situation is in Europe. Every data point out of Europe this week — negative, and suggesting the economy there is just getting worse. Now, there`s also disappointment that the European Central Bank hasn`t done even more to stimulate the economies there.

Increasingly, analysts are beginning to wonder whether Europe is not turning into Japan. Japan stagnated for two decades. And the consensus is that the country wasn`t aggressive enough on monetary policies, wasn`t aggressive enough about cleaning of zombie banks, and wasn`t aggressive enough about doing structural reforms to the economy.

All of those things are needed in Europe right now, and they know that, but politics has kept a lot of it from happening. But if they don`t get it done soon, at best, they could turn into Japan. At worst, they could face yet another crisis like we saw in the summer of 2011.

There`s a lot of tests coming for that continent.

For NIGHTLY BUSINESS REPORT, Michelle Caruso-Cabrera.

(END VIDEOTAPE)

GHARIB: Still ahead on the program, a new wave of health care regulations is creating a shortage of people that help keep hospitals up and running. Mary Thompson looks at where the jobs are, next.

(MUSIC)

MATHISEN: More recalls yet again for General Motors (NYSE:GM), this time involving over half a million cars and sport utility vehicles, the latest recalls are for Cadillac and Saab SUVs to fix a rear suspension problem that could cause drifting at high speeds, and for Chevy Spark, that`s a compact car, to secure the hood from opening while the car is moving. GM also told the dealers to stop selling the new 2015 Chevy Colorado and GMC Canyon pickups in advance of a recall over a a potential air bag problem.

GHARIB: Hundreds of thousands of Americans got jobs in September as we have been reporting tonight. But the medical industry is in desperate need to hire skilled workers, especially medical coders. A growing shortage of this back office workers threatens to disrupt the flow of funds from insurance companies.

In our ongoing series “Where the Jobs Are”, Mary Thompson takes us to Springfield, Missouri.

(BEGIN VIDEOTAPE)

MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Behind the health care industry`s front lines, a growing need for workers who help to keep the money flowing in.

TORREY BARNHOUSE, TRUSTHCS PRESIDENT: Right now, there is a dramatic shortage of skilled workers in the market.

THOMPSON: The skilled workers are medical coders. They review a patient`s record, assigning codes to diagnoses and treatments that insurers use to pay medical providers.

Torrey Barnhouse is president of TrustHCS, a firm that contracts coders to hospitals. He is hiring as a change to industry standards is driving demand.

BARNHOUSE: Well, over the course of the next 12 to 18 months, we`ll double our staff.

THOMPSON: By next October, a federally mandated change will increase the number of codes to more than 140,000 to the just over 17,000 used now.
The change could see cutting a coder`s productivity in half, while increasing demand for new coders by 50 percent.

To meet this need, David Strong of Springfield, Missouri-based CoxHealth is recruiting from current staff.

DAVID STRONG, COXHEALTH VICE PRESIDENT: We have a college that has a certificate program for coders. We`re also incentivizing some of our employers doing transcripts and imaging jobs to go through that training to be coders.

THOMPSON: He`s also paying experienced coders more to stay.

STRONG: We recognize there is an increase in salaries for coders out there now, particularly with the contract agencies. So, we`re putting in place retention bonus for our current staff.

THOMPSON: Coding is an accredited position, requiring more than 700 hours of course work in areas like anatomy and pharmacology.

(on camera): Pay can range from $30,000 to $60,000 a year or more for coders to become supervisors or auditors.

(voice-over): With most of the work done online, it provides 37-year- old Gil Tracy transitioning from a career as a radiation technologist something else, flexibility.

JILL TRACY, CODING APPRENTICE: I get off, I get my kids off to school, and I grab a cup of coffee and I sit at my desk in my pajamas, and I code from home all day.

THOMPSON: But coders don`t sit still. Julie Davison has been doing it for 17 years and takes classes on a regular basis, including those for the new codes.

JULIE DAVISON, CODER: As a coder, we go through training, you know, all the time, because it`s part of our job. I mean, everything changes on a regular basis.

THOMPSON: Changes creating a prescription for job growth.

In Springfield, Missouri, I`m Mary Thompson for NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

MATHISEN: Mylan (NASDAQ:MYL) hiked its guidance, lifting shares. And that is where we begin tonight`s “Market Focus”.

The drug maker says its third quarter and full year earnings should be well above what analysts expected. And that is thanks to new drug launches and drug approvals that went through during its latest quarter. Shares popped 8 percent to $50.23.

Walgreen (NYSE:WAG) also saw its shares rise after reporting strong September sales. The drug store chain operator saw a nine percent increase from last year, helped mostly by an increase in its pharmacy sales and prescriptions filled. Shares there up 1 1/2 percent to $60.77.

Facebook (NASDAQ:FB) may be plotting its first steps to get into the field of health care. According to reports the company is exploring creating online support communities that would connect Facebook (NASDAQ:FB) users who are suffering from various ailments. Shares rose slightly to $77.44.

GHARIB: Yahoo (NASDAQ:YHOO) is reportedly looking to invest in Snapchat as part of a fundraising round. It`s expected to value the start- up at $10 billion. The application that let`s people send pictures that disappear has more than 100 million users and last year, it was valued at just $3 billion. Separately, there are reports that Yahoo (NASDAQ:YHOO) has bought the messaging app MessageMe. Shares of Yahoo (NASDAQ:YHOO) up more than 1 percent to $41.03.

Salix Pharmaceuticals (NASDAQ:SLXP) is scrapping its merger with the subsidiary of an Italian drug maker that would have allowed it to shift its tax base to Europe. This comes as the U.S. government has cracked down on these so-called tax inversion deals, where companies move their headquarters overseas to cut their tax burden. The stock rose 1 percent to $152.87.

Medtronic (NYSE:MDT) is changing its tax inversion deal as well, but it still plans to go through with its acquisition of Ireland-based Covidien. The medical device maker says it will restructure the transaction by using $16 billion in debt, rather than using cash held overseas to complete the deal. Medtronic (NYSE:MDT) shares jumped 3 1/2 percent to $65 and change.

And Sprint has launched a new round of layoffs. The job cuts are expected to cost the wireless carrier $160 million in its second quarter.
Shares fell slightly to $6.24.

MATHISEN: Our market monitor tonight says now is the time to take a look at economically sensitive stocks. He`s John Traynor, chief investment officer at People`s United Bank`s $5.5 billion wealth management division.

John, welcome. Good to have you with us.

JOHN TRAYNOR, PEOPLE`S UNITED WEALTH MANAGEMENT: Thank you.

MATHISEN: You like cyclicals, why? And why specifically in the face of a lot of slowing growth outside of the United States?

TRAYNOR: We like the cyclicals, because we believe the U.S. economy is finally going to break out of this 2 percent growth that we`ve seen over the last five years. The second quarter was great. We think that will continue. So, we think the third and fourth quarter will be close to 3 percent.

So, we`re encouraged by the U.S. economic growth. And we think Europe will see some positive news. Not great but positive news next year.

GHARIB: Let`s take a look at some of the stocks that you`re recommending to our viewers tonight. At the top of your list, Capital One, the ticker symbol COF on the New York Stock Exchange.

Why do you like it at $82?

TRAYNOR: We like Capital One. We`ve known it for a while. We want to be exposed to financials. We`re actually overweighting financials on our portfolios right now. Financials can do very well in the gradually rising interest rate which is — interest rate environment which is what we`ll see next year.

Plus, you saw with the employment number, as jobs increase, consumer balance sheets will do better. So, we think Capital One has the wind at their back right now from a credit quality stand point. They would have a very diversified lending business, exposed to credit cards, but a very diversified lending business.

We like it quite a bit. It is trading at a nice multiple. We see good earnings growth next year.

MATHISEN: Another financial is your second pick, Discover Financial.
But you yourself concede that over the past five years or so, this stock has not done much. What`s going to change?

TRAYNOR: We like Discover. We have actually owned Discover for the last three years. It`s one of our longest held positions.

Discover is about as pure a place as you can get on credit cards.
Again, we like financials, could Discover will do better? As consumer balance sheets improve, they have done a great job of rationalizing their business.

So, we like Discover. You know, if you take a look over the last five or 10 years, stock has not done all that much. But we think it is poised for continued growth.

MATHISEN: Last year, looked pretty good. That was a nice chart.

TRAYNOR: Absolutely, absolutely. It has been a good holding for us.
It`s a nice steady grower, very good name for us.

GHARIB: OK. And you have a stock to tell us about. Data storage company EMC (NYSE:EMC), and this is a special situation, isn`t it?

TRAYNOR: That`s right, that`s right. We like the fundamental business. We like their underlying business, data storage. We saw the news on JPMorgan (NYSE:JPM) this morning with security around their data.
EMC (NYSE:EMC) is an important company that can help in that area.

There is also a side that your viewers will know, there`s also some talk that EMC (NYSE:EMC) could partner with some other tech giants. We like the business and we think a combination with another tech giant could make this an even better story.

MATHISEN: Quick answer, John. Will the markets end higher than they are today at the end of the year?

TRAYNOR: We — our target is 2,050 for the S&P 500, where there are other firms a little higher than us, but we think — we think we`re going to be moving higher, yes.

MATHISEN: All right, John. Thank you very much. Have a great weekend.

TRAYNOR: You, too.

MATHISEN: John Traynor with People`s United Wealth Management.

And coming up: for your ears only. How one entrepreneur is using 3D printing to solve a common problem, ear buds — those ear phones that don`t fit right. Her story, next.

(COMMERCIAL BREAK)

GHARIB: UPS and FedEx (NYSE:FDX) are working hard right now to make sure your holiday deliveries arrive on time this year. Package deliveries were a disaster last year, as you remember, because of that wicked winter weather got the better of late shoppers and retailers that over-promised speedy deliveries. Now, UPS is pressuring e-commerce companies to hold their big sales in mid-December instead of just days before Christmas and to stagger sales in different parts of the country to help deliveries.
It`s also asking retailers to end any offers of free overnight shipping on December 23rd.

MATHISEN: In the last year, we have seen big companies like General Electric (NYSE:GE) and Boeing (NYSE:BA) begin to use highly sophisticated 3D printers to make parts for jets, making mass production with 3D printers a reality.

Now, one woman got a bright idea to make a customized consumer product using 3D printers — ear phones, because no two ears are alike.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: Your ears are quite alike anyone else`s.

MATHISEN: No wonder so many of us seem to share a common problem, with ear phones.

NIKKI KAUFMAN, NORMAL FOUNDER: A lot of consumers say, my right ear is so weird, nothing stays in.

MATHISEN: It bothered Nikki Kaufman for years.

KAUFMAN: Lots of ill-fitting earphones. Nothing was comfortable. I would leave them in hotels. I throw them away, because I never found a pair that was, you know, was for me.

MATHISEN: So, she opened Normal, over the summer, aiming to make ear phones that fit the new normal.

UNIDENTIFIED MALE: And it fits like a damn glove.

MATHISEN: Kaufman has been watching entrepreneurs all her life, starting with her dad. As a competitive swimmer, she learned to tackle challenges. Later, she was a founding member at Quirky, a New York start- up that helps entrepreneurs turn their ideas into real products.

KAUFMAN: I learned a lot about strength, and endurance, when it`s hard, how to keep going, and how to work with different types of personalities and in different environments.

MATHISEN: At Quirky, she learned how the 3D could speed up the prototyping process. A little more than a year ago, hit her — instead of one-size-fits-all head phone she thought, what about making a pair for each unique set of ears?

She knew nothing about making ear phones or good sound. But with only a rough prototype she got enough investors interested to raise $5 million.

She and her team built their headquarters in New York. It`s part retail space, part office, and part factory.

What`s not normal, at least not yet, is the way she is using 3D printers. Ten of them, with a base cost of about $60,000 each.

KAUFMAN: Normal is one of the first companies to use 3D printing to mass-produce consumer goods.

MATHISEN: Large scale manufacturing with 3D printers is still in its infancy. At Normal, headphones can be mass produced, yet customized.

KAUFMAN: Ears, really, no two are likely, even those on either side of your own head.

MATHISEN: So, how does it work?

Well, if you can`t come to their store? The normal app will instruct you to hold a quarter at each other as you take a series of photographs, pick a color, and a cord length and Normal`s proprietary design process, that`s their secret sauce, takes care of the rest. The printing alone takes about an hour and then there is some post-process

KAUFMAN: It gets cleaned, it gets sanded, it gets smoothed, it gets the soft touch spray, then it gets assembled, matched with this cable assembly that you chose in the app, the driver that you chose.

MATHISEN: The cases are unique, too, a fit for your pair only. In person, you can get same-day serviced, otherwise shipping is usually processed within 48 hours.

Either way, the cost is $199.

KAUFMAN: It`s a premium product. We feel it`s the right price point for the product that we`re delivering right now.

MATHISEN: That`s now. But the future?

KAUFMAN: The idea could be much larger than headphones and ear phones, right? There is other wearables or other products or things that you could make mass customized by 3D printing. We`re not working on those yet, but certainly thinking of ideas.

(END VIDEOTAPE)

MATHISEN: I want to take out my IFB and use a new one to hear things (ph).

GHARIB: Normal.

MATHISEN: Yes, use a normal one.

And kind of gets the imagination running, doesn`t it? To make those usually meant a trip to the doctor`s office, to get silicon squirted into your ears. By the way, Normal has 24 employees, the space they build in Manhattan can be adapted to add more printers if demand warrants.

GHARIB: And it looks like it`s headed that way.

Well, finally tonight, you know things are tough when even Ben Bernanke can`t refinance his mortgage. The former head of the Federal Reserve told an economic conference that he recently tried to refinance his current home mortgage but was turned down. Bernanke, who left the Central Bank in January, made at least $250,000 for his first public speaking gig.

Now, that says that lenders may have gone a bit overboard in setting tight conditions for homeowners, you think?

MATHISEN: It`s very hard — for people who become contractors and don`t have a steady sort of W-2 paycheck to show, the banks often don`t like that. They want to see that income, but he`s —

GHARIB: He`s got a book contract. He has these expensive speeches.
Why is he refinancing?

MATHISEN: I bet he has heard from some bankers today.

GHARIB: That`s NIGHTLY BUSINESS REPORT for tonight. I`m Susie Gharib. Have a great weekend, everyone.

MATHISEN: And the same from me. I`m Tyler Mathisen. Have a wonderful weekend. We hope to see you back here on Monday.

END

Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. 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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