Transcript: Nightly Business Report- November 5, 2015

NBR-ThumANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and
Sue Herera.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: How healthy? After three
months of disappointing growth and mixed signals along the way, tomorrow`s
jobs report could bring the picture into focus. We`ll look at the state of
the labor market.

What`s in a name? How do you know that organic food on your table is
really organic? The answer is more than just looking at a label.

And, class action. Why one lawsuit accuses a drug company of
illegally driving sales of its painkilling drug.

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
November 5th.

Good evening, everyone. Ty is off tonight.

After three months of disappointing job growth tomorrow`s government
employment report will go a long way in determining whether that slump was
temporary or a bit more. It`s also the penultimate jobs report before the
Federal Reserve`s next meeting in December, where many believe the central
bank might raise interest rates.

Hampton Pearson takes a look at what to expect and where we stand.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Most leading
economists and Fed watchers are looking for a rebound in job growth in
October. The consensus forecast calls for an increase of 180,000 jobs
added to non-farm payrolls, well above the average of just 139,000 for
August and September, with headline unemployment holding steady at 5.1
percent.

JIM IUORIO, TJM INSTITUTIONAL: We`re expecting about 180. If it
comes in anywhere north of 150, I think the market will still believe that
they plan on tightening.

PEARSON: It`s the first of two employment reports that will be on the
desk of monetary policymakers when they meet in December. A meeting
described this week by Fed Chair Janet Yellen as a live possibility for the
first rate hike in nearly a decade.

JANET YELLEN, FED CHAIR: What the committee has been expecting is
that the economy will continue to grow at a pace that`s sufficient to
generate further improvements in the labor market and to return inflation
to our 2 percent target over the medium term.

PEARSON: The economic data is mixed. Last week, jobless claims
posted the biggest weekly increase since February. But the four-week
moving average shows claims at their lowest level since November of 2000.

Meanwhile, the Labor Department says worker productivity actually
increased in the third quarter, with manufacturing producing more new cars
and other big ticket durable goods leading the way. But year-over-year
productivity remains week and a major contributor to stagnant wages,
economists say, because businesses are reluctant to invest in new plants
and hire more workers.

IAN SHEPERDSON, ECONOMIST: If you`re getting more out of each worker
employed for the same rate of growth of output, then you`ll need fewer
people and payroll growth will slow.

PEARSON: A rebound in consumer spending has been the key to overall
economic growth. A strong jobs report heading into the holiday season
could make that fed decision in mid December a little more transparent.

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

(END VIDEOTAPE)

HERERA: Despite some disappointing jobs data this week, the staffing
firm Challenger Gray & Christmas released positive labor news today.
According to the report, overall layoffs fell 14 percent last month, but
the number of job cuts in the oil patch jumped to a six-month high as that
industry struggles with persistently low energy prices.

So, John Silvia joins us now to talk more about the state of the labor
market and what this mixed data is really telling us about the jobs
picture. He is chief economist at Wells Fargo (NYSE:WFC) Securities.

Good to see you again, John. Welcome back.

JOHN SILVIA, ECONOMIST, WELLS FARGO SECURITIES: Thank you.

HERERA: Let`s start first of all with how you interpret this data.
It has been choppy. It`s been a little bit confusing.

Tell me how you see the labor market right now.

SILVIA: Well, I think Hampton`s got it right. There will be a
rebound, 180,000, 190,000 sounds about right to us. But I certainly agree
with your characterization of mixed because what we`re really seeing is the
domestic service sector of the United States, especially, you know,
consumer spending, as was mentioned earlier, was really pretty solid. What
is week of course is the manufacturing in the export sector.

So, what we`ve seen is the service numbers are pretty good in terms of
jobs. But manufacturing`s taking a little bit of a hit. So, indeed, it is
a mixed picture overall in the U.S. economy.

HERERA: Kind of a tale of two economies, if you will.

SILVIA: Absolutely.

HERERA: So, what is the growth rate in jobs going to like for the
foreseeable future?

SILVIA: Well, I think it`s going to moderate relative to the last two
or three years. We`ve had really pretty solid years of job gains of
200,000, 220,000 on average. I think what we`re going to see now going
forward, 180,000, 190,000, probably is going to be the pace of job gains
over the next 12 months.

I think one of the challenges here, as I`m sure you`re aware, is labor
force participation rates have slowed down. Labor force growth has slowed
down. And as a result there`s just less people coming in and somehow
companies have become accustomed to slower economic growth. So they demand
fewer workers. So, there is definitely a slowdown in place.

HERERA: And I know that the Fed is probably looking at all of these
very same things. Where do you think it puts them in terms of a possible
interest rate hike in December? Because that has also been the big topic
of discussion after Ms. Yellen`s testimony the other day.

SILVIA: Yes, there still seems to be an expression at the Fed that
their expected inflation rate will pick up toward 2 percent. And my sense
is with the gains in employment, the unemployment rate staying around 5
percent, 5.1 percent, that that`s probably going to be enough evidence for
the Fed to move into December.

HERERA: All right, John. We`ll leave it there. Thank you so much.
John Silvia with Wells Fargo (NYSE:WFC) Securities.

SILVIA: Thank you.

HERERA: Dow component Disney (NYSE:DIS) posting a mixed quarterly
earnings report on an adjusted basis. The entertainment company earned
$1.20 a share, beating estimates by six cents, helped out by its media
networks, particularly ESPN. Revenue of $13.5 billion was a very slight
miss but essentially pretty much in line. Shares were volatile after the
report and were off a fraction in the regular session, closing at $113 a
share.

Julia Boorstin tells us the one thing investors should focus on in
Disney`s numbers.

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Strength at
ESPN and Disney`s other cable networks drove Disney`s earnings higher than
Wall Street predicted. That strength of ESPN perhaps surprising after
Iger`s comments last quarter lowering expectations for ESPN and raising
concerns about the health of the traditional TV business sparked a sell-off
of media stocks.

BOB IGER, DISNEY CEO: We feel really bullish about our television
businesses, in particular ESPN, and look back on the quarter if we could do
it over we wouldn`t. We wanted to be candid about what we were seeing.
The fact remains that the guidance that we updated back then remains in
place today and ESPN`s future, particularly given the array of great
programming that they have and the demand that I just mentioned that`s out
there in the marketplace for it remains very bright.

BOORSTIN: Iger saying that as Disney (NYSE:DIS) sees more competition
from platforms that offer more mobility, he sees more opportunity than ever
to distribute Disney (NYSE:DIS) content direct to consumers and to reach a
bigger audience.

Back to you.

HERERA: Thank you, Julia.

Stocks barely budged as investors wait for tomorrow`s employment
report. The Dow Jones Industrial Average was off four points to close at
17,863. The NASDAQ fell 14 points. And the S&P 500 was down two points.

Well, this holiday season is fast approaching, and the Postal Service
is gearing up. It`s expecting to deliver more than 15 billion pieces of
holiday mail and packages this year between Thanksgiving and New Year`s
Eve. That`s a 10 percent increase when compared with last year`s volume.
The Postal Service plans to hire 30,000 employees to meet that demand.

It`s also the busiest season of the year for the shipping industry and
its biggest carrier is issuing a profit warning. And that`s not the only
worrisome sign for an industry that`s deeply entwined with the global
economy.

Morgan Brennan has more.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Call it a
shipping slump. The world`s biggest ocean carrier, Maersk, is slashing
4,000 jobs and halting deliveries of new vessel, this after a surprise
profit warning.

And Maersk isn`t alone. Many operators reporting disappointing
earnings and downbeat outlooks. And German operator Hapag-Lloyd, which is
going public, has had to cut the terms of its stock offering several times.

Analysts say the industry is facing a number of headwinds.

CHRISTIAN WETHERBEE, CITI: Developed economy demand has been fairly
slow. So we`ve seen, you know, overall deceleration in the pace of demand
growth. We have seen a lot of supply coming on as well. But really that`s
one of the major factors, is the fact we`re just not growing as a global
economy as fast as we have in the past.

BRENNAN: Shipping association BIMCO says 2015 is experiencing, quote,
“the highest inflow of new capacity ever”, as mega ships capable of
carrying tens of thousands of containers come online.

Couple that with slowing global economic growth, particularly in China
and Europe, and shipping rates have plunged to multiyear lows. Still, not
every company in the business is struggling. Seaspan (NYSE:SSW)
Corporation, which owns and leases ships in long-term contracts believes
this is a short-term rough patch.

GERRY WANG, SEASPAN CORPORATION: We are very confident in long-term
prospects of the industry. The industry has gotten much bigger and much
more sophisticated. The operators, our customers know how to navigate
through the ups and downs. The demand has been weak for certain trades but
North American trade. It`s very, very strong.

BRENNAN: But whether North American trade can remain strong is the
key. U.S. economic growth slowed to 1.5 percent in the third quarter,
according to early estimates from the Commerce Department. And some
container ship operators are warning that the late summer through fall peak
season when they ship all those retail goods in containers never really
came. That could be an early indicator that the holidays might not be as
strong as expected.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.

(END VIDEOTAPE)

HERERA: Coming up, a $40 billion industry that relies heavily on
honesty and why that could have a big impact on what you eat.

(MUSIC)

HERERA: When you think of Seattle and business, names like Microsoft
(NASDAQ:MSFT) and Amazon (NASDAQ:AMZN) are likely to come to mind.

And as Kate Rogers (NYSE:ROG) tells us, those big names are helping to
attract talent and make Seattle`s startup scene one of the best around.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Microsoft
(NASDAQ:MSFT) hasn`t been a startup in decades since Bill Gates and Paul
Allen launched out of a garage in 1975. But the tech giant, which is based
in Redmond, Washington, is getting back to its roots in nearby Seattle,
gearing up for its latest cohort of Microsoft (NASDAQ:MSFT) ventures.

This is Microsoft`s global accelerator program with 410 graduates that
have raised $1.2 billion collectively in funding. This latest round of
start-ups in Seattle will focus on machine learning.

ZACK WEISFELD, MICROSOFT VENTURES: You have great enterprise
companies in this area. So it`s a great place for us to do both work with
start-ups on clouds, work with start-ups on enterprise software, and, you
know, we`re very interested in this class with data scientists and the
whole machine learning space.

ROGERS: From anchor tenants like Microsoft (NASDAQ:MSFT) and Amazon
(NASDAQ:AMZN) to a network of incubators and accelerators for new
companies, Seattle`s startup scene is thriving. It ranked number 8 on
Compass` global startup ecosystem report in 2015 for startup cities around
the world.

As far as accelerators go, Fledge is a bit different. If you want to
become the next Etsy or Tom`s Shoes, this is the place to be.

LUNI LIBES, FLEDGE: Fledge helps what we call conscious companies
which are mission-driven for-profit companies. So, these are companies
that are trying to do good in the world but doing it as a business.

ROGERS: Applicants come from all over the globe. In 3 1/2 years,
they`ve had 39 grads collectively raise $10 million. The accelerator is
funded by impact and angel investors. And past grads have found ways to
recycle cotton and grow sustainable escargot domestically.

And cash is flowing into Seattle quickly. In fact, the city says in
the first half of 2015, there have been 99 deals so far with more than $900
million in investment.

But there`s one more area of growth in Seattle that can`t be
overlooked — recreational marijuana. After being legalized in 2012 and
going on sale last year, entrepreneurs like Ian Eisenberg are cashing in.
He`s doing about $1.4 million in sales each month.

IAN EISENBERG, ENTREPRENEUR: Well, Seattle`s always been sort of the
end of the line frontier city, and it still is. You know, we`re leading
the world right now in legalized pot. And it`s also got a vibrant arts
scene and music scene. It`s not just tech. That`s why a lot of tech
companies want to locate here.

ROGERS: Industry watcher Green Wave Advisers LLC projects Seattle`s
recreational market will hit $49 million in 2015, up from approximately $9
million in the second half of 2014.

Tech start-ups to conscious companies and even marijuana shops,
Emerald City`s small businesses are seeing green.

For NIGHTLY BUSINESS REPORT, in Seattle, Washington, I`m Kate Rogers
(NYSE:ROG).

(END VIDEOTAPE)

HERERA: Cost cuts helped Ralph Lauren post results that top
estimates. And that is where we begin tonight`s “Market Focus”.

Although the apparel maker posted results that were better than
expected, its quarterlies were lower when compared to last year. This as
the strong dollar resulted in a decrease in tourism in the company`s most
recent quarter. That weighed on store traffic. Nevertheless, shares
soared 15 percent to $135.45, making it the best performing stock in the
S&P 500 today.

Kraft (NYSE:KFT) Heinz reported declining results following its recent
merger. The company also announced a dividend hike. Its payout will now
be 57 1/2 cents a share and will be payable on November 20th. Shares were
volatile in after-hours trading. During the regular session, the stock was
off just a fraction to $75.42.

The New York attorney general has launched an investigation into
ExxonMobil (NYSE:XOM). The probe is looking into whether or not the
company misled the public about the risks of climate change and how those
risks may hurt its oil business. Shares of the Dow component fell more
than 1 percent to $84.81.

An executive announcement from United Continental. The CEO saying he
plans to return to work in the first quarter of 2016. He`s been out on
medical leave following a heart attack. Shares rose slightly in initial
after-hours trading. During the regular session, the stock was little
changed to close at $60.30.

Valeant Pharmaceuticals fell sharply again today in the wake of a
Senate committee launching an investigation into drug price increases.
Some on Wall Street are also reportedly growing concerned that a “Wall
Street Journal” article may show one of the company`s big shareholders
might be wavering in his support of Valeant`s management. The stock
plunged more than 14 percent to $78.77.

Time, Inc. issued a disappointing guidance. This as the publisher
continues to see a decline in print advertising revenue. But that`s
partially being offset by an increase in digital ads. Shares fell more
than 5 percent to $18.01.

And Shake Shack delivered strong results and reported a big increase
in same restaurant sales. On that, the burger chain hiked its revenue
forecast. Shares popped initially after the close. During the regular
session, the stock was up 4 1/2 percent to $51.11.

Shares of Whole Foods were down more than 2 percent after missing on
its earnings last night. The company`s profit fell by more than half
thanks in part to the intense competition because organic foods are now
more widely available.

So, as Americans dish out more money for natural foods, are they
really getting what they`re paying for?

Jane Wells has the dirt on what it really means to be organic and if
you should trust it.

(BEGIN VIDEOTAPE)

JANE WELLS, NIGHTLY BUSINESS REPORT CORRESPONDENT: At last month`s
meeting in Vermont of the National Organic Standards Board, a government
group which sets rules for the organic industry, local farmers protested
outside that not everyone certified organic grows in soil, and inside the
meeting —

UNIDENTIFIED MALE: Not one egg-laying operation had any chickens
outside.

WELLS: Another group accused the USDA organic program of being in bed
with big agribusiness. It`s a sign that some want to panic about organic,
an industry which has grown to nearly $40 billion in sales last year in the
U.S., closing in on nearly 5 percent of all foods sold.

GARRETT NISHIMORI, SAN MIGUEL PRODUCER: But now, there`s so much
competition. And with kind of the recent challenges, growing challenges
especially with the drought, the recent drought, you know, we`ve seen costs
rise and prices kind of come down.

WELLS: Garrett Nishimori`s family has been growing organic greens for
12 years in California. There are 24,000 certified organic producers in
the U.S. and more outside the country sending food here.

But food bearing that USDA certified organic label isn`t actually
checked by the USDA but by third-party contractors.

UNIDENTIFIED MALE: It`s webbing from the mealybug.

WELLS: And certifiers are paid by the farmer.

UNIDENTIFIED FEMALE: Bundle grass.

WELLS: To become certified organic a farm cannot have anything
conventionally grown on it for three years. Producers have to submit a
plan and provide proof they`re not used banned pesticides or herbicides.
There`s a lot of paperwork and an annual audit like the one Tim Cheng of
certifying agency CCOF was doing with Debby Zygielbaum of Robert Sinskey
Vineyards in Napa.

Cheng looked everything over, but he did not take soil samples or test
for pesticide residue. His company says that`s done 5 percent of the time
and there are also surprise inspections.

But former certifier Mischa Popoff, who worked for a different agency,
said he never did any of that.

MISCHA POPOFF, FORMER CERTIFIER: Sadly, we can`t trust the organic
label right now. It`s a bureaucratic honor-based system. And that`s
unfortunate for all the honest organic farmers out there.

JAKE LEWIN: I think it`s really a mistake to make the assumption that
the system is full of cheaters. There`s no evidence for that.

DEBBY ZYGIELBAUM, ROBERT SINSKEY VINEYARDS: It`s an honor system,
right? There are things that can be done. Like they do testing to make
sure there aren`t residues and things but when it really comes down to it
it`s an honor system.

WELLS: The bigger the industry grows the greater the challenge to
police it, especially foreign foods certified as organic by foreign
inspectors. At the same time plant pathologist Steve Savat says
conventionally grown food in the U.S. has never been safer.

STEVE SAVAT, PLANT PATHOLOGIST: There`s probably no place in the
history of humanity that has had such an amazing diverse consistent supply
of food, and yet, maybe nobody in history who has worried about it more.

WELLS: For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.

(END VIDEOTAPE)

HERERA: Coming up, why one drug company is being sued by investors
over its sales practices.

(MUSIC)

HERERA: Here`s what to watch for tomorrow. The October employment
report is out. And also on the data front, a report on consumer credit.
We`ll hear from more fed officials and be listening for any clues on an
interest rate hike. And that`s what to watch for on Friday.

For the past few days, we`ve been bringing you reports on a company
called Insys Therapeutics that markets and sells an extremely potent
painkiller called Subsys, Subsys fentanyl specifically.

This morning, we learned the company`s CEO Michael Babich has stepped
down. The company also reported earnings today that included record sales
of Subsys.

Dina Gusovsky brings us the final installment of our series, “Pushing
Pain, Profits Before Patients”.

(BEGIN VIDEOTAPE)

DAVID HART, ASST. ATTORNEY GENERAL, OR: The goal was profits,
regardless of the effect on patients.

DINA GUSOVSKY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Oregon
Assistant Attorney General David Hart is talking about Insys Therapeutics,
a publicly traded company that markets and sells a highly addictive opiate
that the FDA says should only be used for persistent cancer pain called
Subsys Fentanyl.

MICHAEL BABICH, INSYS THERAPEUTICS, INC.: One of our biggest
commitments is to remain profitable and cash flow positive and continue to
promote shareholder value which driving sales of Subsys.

GUSOVSKY: Ongoing investigations and litigation including a class
action lawsuit against the company accuse Insys of engaging in illegal
activity to drive those sales.

For example, the company has a prior authorization department which
offers to work on behalf of patients to get insurance to pay for the
expensive drug.

HART: The prior authorization unit would seek authorization for use
which the label says is harmful to the patient.

GUSOVSKY: According to this settlement, in Oregon alone out of the
preauthorization forms submitted by Insys most were for off-label use. The
class action lawsuit also accuses some Insys employees of pretending to
work for a doctor`s office and falsely stating that patients had tried
other painkillers that were ineffective.

Investors suing Insys say the company offered the preauthorization
service to ensure dependence and addiction to Subsys, a very lucrative
proposition for Insys.

Shannon Walsh resigned from Insys in October.

SHANNON WALSH, FORMER INSYS EMPLOYEE: I really wanted to come in here
and help cancer patients that are having severe pain.

GUSOVSKY: Her father experienced that kind of pain during his battle
with cancer, but when Shannon told management that she wanted to approach
palliative care offices —

WALSH: I was basically told just don`t bother to call those offices
because the patients would die too quickly, so they wouldn`t trade up to a
higher dose and they wouldn`t get a lot of refills, and so they weren`t
profitable enough patients to bother with.

GUSOVSKY: And in a country where addiction to painkillers is a
growing problem, putting profits before patients only fuels the epidemic.

(END VIDEOTAPE)

HERERA: Insys sent us this statement earlier today, quote, “Insys
takes patient safety very seriously, and we are committed to working with
health care providers to help ensure the proper prescribing of our
products. Our compliance program is designed with this in mind. We are
cooperating with the governmental inquiries we have disclosed in our public
findings.

Dina joins me now on set.

So, Dina, what is the latest on the lawsuit?

GUSOVSKY: So the plaintiffs and the company have reached a tentative
settlement which would require Insys to pay over $6 million to some of
those investors who had purchased the stock.

HERERA: All right. Now, a number of doctors are pushing back on the
use of opiates. But this is a very interesting situation because that drug
can help with pain.

There`s a fine line there somewhere, which I think your series really
pointed out. There`s a fine line about the use and then the improper use
of this particular drug.

GUSOVSKY: Absolutely. Just because a drug is indicated for a
specific use by the FDA doesn`t mean that it can`t be used for other
reasons if the doctor sees fit. So, it`s not illegal for the doctor to
prescribe off label. What is illegal is for the company to market off
label.

So, this class action lawsuit really questions a number of things. It
questions why so much of that approval is for off-label use and why the
insurers are approving it in the first place.

So, there are so many questions that are still unanswered in that
process. What happens in that prior authorization unit for those kinds of
results?

HERERA: You know, it also begs the question the liability for the
insurance companies, if they are approving on a very large scale use of a
drug for off-label use.

GUSOVSKY: Absolutely. I mean, that`s another great point. Do they
know the patient`s history? That`s something that the doctor has to know.

And in that prior authorization, the patient actually signs away his
or her medical privacy and rights to the company in order for the company
to try to approve the drug.

Now, we spoke with one physician who said for a doctor who has, you
know, staff — is light on staff and light on research this is a great
service. But what he emphasized is what they cannot do is go from fact to
fiction. And that is another unanswered question here.

But again, the company did not comment specifically on those questions
that we did ask them what goes on in the prior authorization unit but they
did send us that statement.

HERERA: And we should point out very quickly that you called the
company during your shooting of this whole series —

GUSOVSKY: Several times.

HERERA: — numerous times and it was only today they got back to you.

GUSOVSKY: Absolutely.

HERERA: All right. Dina, thank you very much. Appreciate it.

All right. That is NIGHTLY BUSINESS REPORT for tonight. I`m Sue
Herera. Thanks for watching. And we`ll see you tomorrow.

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) 2015 CNBC, Inc.

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