Transcript: Nightly Business Report – November 17, 2016

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

claims fall. Housing starts climb. Inflation finds its footing. The numbers say the economy is looking up.                                                                     But not everyone is feeling it.

Attention Wal-Mart (NYSE:WMT) investors. The world`s largest retailer is
entering the crucial holiday season on a slightly disappointing note.

What`s old may be new again. Remember the bridge no nowhere? Well, some
lawmakers want to spend again on specific pet projects.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
November 17th.

Good evening, everyone. Welcome. I`m Sue Herera. Tyler Mathisen is off

The economy is revving. Today, the government released some of the best
economic data on jobs, housing, and inflation in years, in some cases,

Here`s what we learned. The labor market is strengthening. Jobless
claims, a proxy for layoffs, tumbled to a level not seen since Richard
Nixon was in office. Home construction is also ramping up, rising at its
fastest pace since 2007. Inflation, something the Federal Reserve has been
searching for, is showing signs of firming.

But across America, as we know, there is an economic divide with many
feeling uncertain about their economic future. And the upbeat picture we
got today may not tell the whole story.


HERERA: Call it the data disconnect. Consumer price numbers, up. Housing
starts, up. And jobless claims, a proxy for layoffs, down. Now at 43-year
lows. They`re among the most positive economic reports in decades.

Those numbers do explain why Federal Reserve Chair Janet Yellen says an
interest rate hike may be imminent. What they don`t explain is the unrest
President-elect Trump successfully mined in last week`s election.

Take consumer prices. Up in October by nearly half of 1 percent from a
month earlier, a jump driven by higher gas and electricity costs. Housing
prices are up too. But food and medical costs are relatively flat.

Year to year, prices are up 1 1/2 percent, the biggest gain in two years,
and not far from the Fed`s 2 percent target, a number we haven`t seen in
four years. The Fed benchmarks 2 percent as a sign of growth with a
relatively low risk of sudden price spikes.

The Labor Department`s consumer price index isn`t the only price measure
used by the Fed. It also uses the Commerce Department`s personal
consumption index, and that`s been up as well. In September, it was up
more than 1 percent, the biggest jump in almost two years. October`s
number is due later this month.

Despite the higher prices, consumers are buying. Wages rose in October,
the most since mid-2009. And retail spending is up in each of the past two

Housing construction is up as well. Today, we learned housing starts
jumped in October more than 25 percent, the most in nine years, fueled by a
boom in multifamily starts, up almost 75 percent. Housing permits, a
measure of future construction, were up 2, though not nearly as much.

And finally, jobless claims dropped last week, down to their lowest levels
since 1973, well below expectations.

So, why then, with jobs safe, wages up, and housing construction going
strong, is the mood of the country so foul? The cry for change so loud?
The numbers reflect a recovery. But it`s an uneven recovery. Not mirrored
in places where jobs remain scarce and opportunity is lacking.


HERERA: And we have picked up on some of those fault lines dividing the
country from geography to education to ethnicity. And it gives us some
insight as to where the recover is being felt and where it is not.

Noah Bierman, national and political reporter at “The Los Angeles Times”,
as does Janet Adamy, the news editor for “The Wall Street Journal,” where
she writes about demographics for her economics team. Both of them during
the campaign were all across the country talking to people in various walks
of life.

Welcome to both of you. Appreciate it.


HERERA: Noah, let me start with you. There was a line in one of your
stories that really struck me. It says, “This divide was as wide as any in
recent history between those who believe Donald Trump will destroy
everything America stands for and those who are certain it`s already so
destroyed, that Trump is the only one who can fix it.”

And that really crystallizes the huge divide that we have between maybe the
two coasts and Middle America.

BIERMAN: Yeah, I think just from speaking to people — obviously, they
didn`t always put it quite in those terms, but you really had a sharp
division about how people felt about the country, how people thought that
their friends were — you know, people at Trump rallies didn`t know a
single person who voted for Clinton. Clinton supporters didn`t know a
single person who voted for Trump. You really had sharp divisions, and
that would be in their Facebook (NASDAQ:FB) groups, but also their
neighborhoods and all these places where we congregate now.

And, you know, you definitely see and I found your report really
interesting on the data, because you`re right, it didn`t necessarily — it
wasn`t necessarily just people in lower income categories that voted for
Trump, right?

But Gallup had some interesting polling about a month ago that said it was
a measure of those who felt economically insecure were more likely to vote
for Trump across income levels. So, a lot of this division was really just
in your personal feeling of security.

HERERA: And, Janet, that goes to some of the demographics that you
discovered when you were in Wisconsin, at Arcadia, Wisconsin. That economy
is actually above average. But people there felt that they still couldn`t
get a leg up. And average wasn`t so great anyway.

one thing that you can`t discount in all this is the role that rapid
demographic change has played, particularly in the Upper Midwest. We did
an analysis of census data where we found that the places that had
diversified the fastest in the U.S. over the last 15 years are small towns,
and kind of a core part of the Midwest, Wisconsin, Iowa, Indiana.

What we found was that, surprisingly, wage growth in these areas was
slightly above average. Unemployment was a little lower. These are towns
where they have the manufacturing jobs, immigrants have been moving in.
And so, while people in those towns, the job market was fairly robust,
there was a lot of — people felt very unsettled about just how quickly
their towns had changed.

I think to us it was a sign that immigration really struck a chord in some
of these places.

HERERA: Uh-huh, which, of course, Mr. Trump ran very heavily on.

Noah, let me go back to you. You say that some of the people you talked to
gave you the indication that there were two Americas, and as a result of
that, they were willing to take a bet on voting perhaps for Mr. Trump,
because Mrs. Clinton had been in the establishment for so long. They were
looking for change.

BIERMAN: Yeah, I think that`s right. I think Trump, the persona also, you
know, we can`t discount that. If you look at Mitt Romney from four years
ago, these feelings were still there. A lot of them quite strongly.

But Democrats were much more successful at portraying Mitt Romney as much
more disconnected than the Democrats. They pointed to his lack of support
for the auto bailout, and that was clearly a big area you know, where the
auto bailout was more popular is where Trump did well. They highlighted
his 47 percent.

Trump, even though he had certainly wealth like Romney did, wasn`t able to
be portrayed that way. I think that was a big deal, because I don`t know
that all these things necessarily have to do with short term cyclical
economic indicators. I think they`re long term fundamental changes in the
economy and the demographics that people are rebelling against.

HERERA: And, Janet, does the long term view that Noah just outlined gel
with what you were seeing when you crisscrossed the country and talked to
people that were undergoing large demographic changes in their communities?

ADAMY: You know, one thing I actually heard a lot about was the idea of
playing by the rules, that particularly whites in these areas who had seen
a lot of Latinos move in, they felt like they had — and some of these
communities in Arcadia, there was a significant number of illegal
immigrants. They felt like they were, you know — they had been there a
long time, they were working hard. And yet they saw Latinos coming in who
were crowding the schools.

They talked about how Latinos qualified for assistance at the food pantry,
they qualified for heating assistance. There was a lot of resentment among
people who, you know, were doing — who had jobs, they were working, and
yet they didn`t feel like maybe they had the financial success that they
wanted, that they had, you know, in their words kind of done what you were
supposed to do in America, and yet there were other people who were coming
in and they were getting help.

So, I heard a lot about fairness when I talked to people in Arcadia,

HERERA: All right. Well, complicated issues all the way around.

Noah Bierman with “The Los Angeles Times,” Janet Adamy with “The Wall
Street Journal” — thank you both. We appreciate your perspective.

BIERMAN: Thanks for having me.

ADAMY: My pleasure too.

HERERA: Following today`s solid economic data, Federal Reserve Chair Janet
Yellen told Congress`s joint economic committee today that the economy is
making very good progress and that a rise in interest rates could come
relatively soon.

Steve Liesman has more.


Yellen cast aside doubts she could possibly resign under the new president,
saying in no uncertain terms she would complete her term.

JANET YELLEN, FEDERAL RESERVE CHAIR: I was confirmed by the Senate to a
four-year term, which ends at the end of January of 2018. And it is fully
my intention to serve out that serve.

LIESMAN: Yellen`s comments before the joint economic committee were her
first since the election. It followed a campaign in which President-elect
Donald Trump harshly criticized her and the Fed for being political and
inflating financial bubbles.

But Yellen extended no olive branch to Trump, warning against political
interference with the Central Bank. She said such interference had led to
terrible outcomes in other countries. She also spoke out against the
president-elect`s plans to scrap Dodd-Frank, the financial regulatory
reform bill, saying she did not want the clock turned back on improvements
to the banking system.

And Yellen cautioned against apparent plans by Trump to enact a package of
massive tax cuts and huge spending programs that could ramp up the deficit.

YELLEN: Such a package could have inflationary consequences that the Fed
would be — have to take into account in devising policy.

LIESMAN: That could potentially mean faster rate hikes from the Fed
because Yellen believes the economy is already near full employment and
doesn`t require stimulus like it was near a recession.

So, the Fed could be headed for a confrontation with the new president if
he slams on the gas pedal with fiscal policy. And the Fed thinks it has to
simultaneously hit the brakes.

As it is, Yellen gave her strongest comments yet that the Fed was set to
hike in December. She said a rate hike could be appropriate relatively
soon and warned of the dangers of not hiking fast enough, saying that would
undermine financial stability and encourage excessive risk taking.



HERERA: That testimony from the Fed chair helped push stocks within
striking distance of all time highs. Those comments sent bond yields
higher, which rise when investors expect higher interest rates. And that
in turn helped lift the financial sector. The Dow Jones Industrial Average
added 35 points to 18,903. NASDAQ was up 39. And the S&P 500 rose ten.

Shares of Wal-Mart (NYSE:WMT) weighed on the blue chip index. The world`s
largest retailer reported better than expected earnings and during the
latest quarter, but its sales fell short of what some on Wall Street had
projected. That sent shares of the Dow component down more than 3 percent.

Courtney Reagan breaks down Wal-Mart`s quarter.


Wal-Mart`s comparable sales are positive for the ninth straight quarter.
Online sales also grew at the fastest rate in seven quarters. The not so
good news, persistent deflationary pressure in food hurt Wal-Mart`s
comparable sales and grocery is more than 50 percent of Wal-Mart`s

And while in-store foot traffic improved over last year, it was at a slower
rate last quarter. Wal-Mart`s holiday sales guidance is below analysts`
expectations and the holiday quarter is the most important of the year.
Wal-Mart (NYSE:WMT) is playing catch-up in its e-commerce business. And
while it`s still early to evaluate the full potential of its recent
acquisition of, Guggenheim analyst Robert Drbul is optimistic the
right moves are being made.

ROBERT DRBUL, GUGGENHEIM MANAGING DIR.: They`re being, you know, very
proactive with the Jet acquisition, a lot of the investments that they`re
making, you know, with their infrastructure in place, with in China.
You know, they`re trying to approach the business from two sides. One is,
keep the store operations humming along, and they`re doing a solid job with
that. And the second is to really stay focused on the e-commerce
opportunity the company has in front of them.

REAGAN: While large investments will constrain near term profit growth,
chief financial officer Brett Biggs told me he classifies the quarter as
strong across the board in the U.S., pointing to Wal-Mart`s continuing
story of transforming the business from a position of strength. Biggs and
U.S. CEO Greg Foran say there was no material impact on consumer spending
patterns ahead of or as a result of the election. In general, economic
data continues to set up a landscape for healthy consumer spending. And
analysts tend to agree.

PAUL TRUSSELL, DEUTSCHE BANK: I think that the consumer has had the
ability to spend, has a healthy — you know, there`s an income statement,
if you will. And I think that we`ve been waiting for them to make the trip
to the store and start to spend. And, of course, Christmas will always
come. So I sense a bit of cautious optimistic here across the retail

REAGAN: And with Thanksgiving and Black Friday weekends looming just a
week away, what more could Wal-Mart (NYSE:WMT) ask for?



HERERA: New account openings at Wells Fargo (NYSE:WFC) fell 40 percent in
October compared to a year ago. The bank also said applications for credit
card plunged applications plunged 50 percent last month following a 35
percent decline in September. Wells Fargo (NYSE:WFC) attributed the plunge
to backlash over the fake account scandal and the bank`s new head of
community banking said, quote, “We have work to do.”

J.P. Morgan has agreed to pay more than $260 million to resolve allegations
it improperly hired unqualified children of China`s ruling elite. It is
alleged that the bank did this to win lucrative business from those in

Regulators say J.P. Morgan used its hiring tactics to corruptly influence
government officials.

Still ahead, the economic ties that bind the world`s first and third
largest economy.


HERERA: Federal prosecutors filed charges in a kickback scheme against
Valeant. The charges allege that the ex-CEO of specialty pharmacy Philidor
Andrew Davenport secretly paid former Valeant executive Gary Tanner $10
million to steer Valeant`s business and to potentially acquire Philidor.
Manhattan U.S. attorney Preet Bharara said together, the two were partners
in crime.


worked with Davenport to build up Philidor, but sometimes at the expense of
Valeant. For example, although Tanner was directed to diversify Valeant`s
relationships with multiple specialty pharmacies, he instead pushed
hundreds of millions of dollars of Valeant business exclusively to
Philidor. And as we intend to prove, he did it for the eventually $10
million kickback.


HERERA: Tanner`s attorney said he was charged with a crime for doing his
job. Shares of Valeant finished the day with slight gains.

Online orders power the results at Best Buy (NYSE:BBY). That`s where we
begin tonight`s “Market Focus”.

The electronics retailer said online sales jumped 24 percent, and that
contributed to a better than expect rise in profit and revenue. Same-store
sales also came in above estimates. But the company did say that it
expects to take a $200 million hit in the current quarter due to Galaxy
Note 7 phone recalls. Shares rose 13 percent to $45.99.

Revenue at J.M. Smucker`s fell more than analysts were expecting. Slower
sales of pet food products like its Meow Mix, as well as its more
traditional Jif peanut butter and Folgers coffee brand hurt their results.
Smucker`s shares were off nearly 4 percent to $124.85.

Oil refiner Tesoro said it would buy rival Western Refining (NYSE:WNR) for
about $4 billion in a deal that would give Tesoro a wide array of new
assets in several states. That merger is expected to close in the first
half of 2017. Western Refining (NYSE:WNR) soared 23 percent to $37.55,
while Tesoro was also higher by nearly a percent at $86.56.

Guggenheim cut Chipotle to sell from neutral, citing the potentially
unrealistic expectations set for growth at the burrito chain. The firm
sees downside risk ahead for the company and also expects new domestic
store openings to slow. Guggenheim lowered its price target on the stock
to $315. But Chipotle shares were unchanged on the day at $402.90.

There are reports tonight that Apple (NASDAQ:AAPL) has asked some of its
manufacturing partners to look into ways to bring the iPhone assembly chain
into the U.S. Right now, all iPhones are manufactured in China.
President-elect Donald Trump says he will force Apple (NASDAQ:AAPL) to
build its products in the U.S. But the report also says that domestic
production of iPhones means the cost could more than double.

President-elect Trump is meeting and hosting his first foreign leader in a
high stakes meeting. Japanese Prime Minister Shinzo Abe arrived at Trump
Tower in New York this evening. One topic on the agenda, trade,
specifically the controversial Trans Pacific Partnership that Trump
campaigned against. And the meeting highlights the importance of the
relationship between the world`s first and third largest economy.

Susan Li reports.


Shinzo Abe became the first head of state to have a face-to-face with
President-elect Donald Trump, in a hastily arranged meeting. Abe was eager
to revisit ties with its strongest ally, the U.S., and its soon to be new
leader in an alliance of trust, as he has called it.

Japan is the world`s third largest economy and America`s fourth largest
trading partner, with close to $200 billion worth of goods exchanged
between the two countries last year. The Asian nation was also central to
the Trans Pacific Partnership, the TPP trade deal, which now looks to be
shelved under a Trump administration. And that would deal a blow to
Japan`s efforts to counter a rising Chinese economy and military power.

Security is another key issue between the two, with Japan and the U.S.
allies since the signing of a treaty in 1960. However, in a threat to
ongoing security relations, the president-elect has warned that he might
pull U.S. forces out of Japan unless Japan pays for its presence. There
are an estimated 54,000 troops currently stationed in the country, costing
$5 billion annually, according to one measure. Japan argues it pays a
substantial portion of this cost.

Trump has also suggested that Japan pursue its own nuclear arsenal in order
to defend itself against rising tensions in the Pacific.

With questions surrounding the U.S. and Japan`s security relationship,
Prime Minister Shinzo Abe has already moved to try to repeal some of the
country`s pacifist constitution.

This meeting is seen as an early indication as to the future of U.S./Japan
relations. But it`s also being watched by others across Asia Pacific,
looking for clues on how the next U.S. president will handle foreign



HERERA: Lawmakers maybe flirting with the idea of ending a ban on
earmarks, which is money usually tucked in the spending bills that an
individual lawmaker stipulates should be put towards a specific project.
The ban has been in effect for six years.

But as Hampton Pearson reports, some on Capitol Hill would like to bring
them back.


President-elect Mike Pence met with House Republicans today, the focus was
on a legislative strategy to jump-start the Trump agenda, likely to include
massive infrastructure spending and tax cuts. House Speaker Paul Ryan says
that toolkit might include a return of earmarks, the old Washington
practice of allowing lawmakers to target spending on specific pet projects.

REP. PAUL RYAN (R-WI), SPEAKER OF THE HOUSE: Our members are worried that
the executive branch, unelected bureaucrats, have been given far too much
power and that we`ve seen violence done to the separation of powers. So,
restoring the power of the purse truly to the legislative branch so that
elected officials can hold the unelected branch of government more
accountable is what is the genesis of that concern.

PEARSON: Ten years ago, earmarks were viewed as a symptom of out of
control spending, including a million-dollar Woodstock Museum in New York
championed by then-Senator Hillary Clinton and Senator Chuck Schumer, and
former Alaska Senator Ted Stevens fighting for years for $223 million to
build what became known as the “bridge to nowhere”.

Ironically, it was six years ago this week that former House Speaker John
Boehner pushed through a moratorium.

an earmark ban.

PEARSON: Now, outside conservative groups are sounding the alarm. Worried
lawmakers are missing the call for change from voters who just elected
Donald Trump.

that after an election on Tuesday when the voters clearly said they wanted
to change Washington, that Republicans might be moving back towards one of
the most egregious examples of how Washington was broken, through

PEARSON: Of course, the biggest x factor going forward is right now, we
really don`t know what President-elect Donald Trump will have to say about
the possible return of congressional earmarks.

For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson on Capitol Hill.


HERERA: Coming up, small business matters. Will a Trump administration
rev up this engine of economic growth and job creation?


HERERA: Complicated rules, onerous regulations, high tax rates — those
are just some of the things small business owners say are holding them back
from expanding or hiring. But with promises of deregulation, will there be
changes under a Trump White House?

Kate Rogers (NYSE:ROG) has our story.


DONALD TRUMP (R), PRESIDENT-ELECT: Obamacare has to be replaced. And we
will do it. And we will do it very quickly.

campaigned hard on the notion of easing government regulations like the
Affordable Care Act. Now, the president-elect`s message of deregulation is
striking a hopeful chord on Main Street. Government regulations
consistently rank as a top issue for America`s small companies, coming in
only behind the rising cost of health insurance this year, according to the
National Federal of Independent Business.

coming out of Washington over the past decade has caused a lot of
uncertainty, created new costs, and has hurt small businesses in terms of
their competitiveness. So, the surge in regulation is something that
Washington really needs to address and the new administration needs to

ROGERS: Getting to work on Obamacare is a priority for Trump and small
business advocates.

TODD MCCRACKEN, NSBA PRESIDENT: We`re very much advocates of getting rid
of the employer mandate, as part of the repeal and replace of Obamacare.
Data has clearly shown that the employer mandate does not increase overall
health insurance coverage. All it really does is increase costs and
regulatory burdens on employers.

ROGERS: Another burden coming down the pike on December 1st, the
Department of Labor`s new overtime regulation when enables an additional 4
million salaried workers across the country to become eligible for
overtime. The rule was put in place by the Obama administration in the
face of a stagnant federal minimum wage at $7.25 an hour since 2009.

KERRIGAN: Doubling the threshold from just over $23,000 to $46,000 is
going to really impact many of our members, particularly in low cost areas
of the country. So, we would like this to be fixed.

ROGERS: Finally, Main Street is closely watching the wage debate with 29
states and Washington, D.C., currently requiring wages above the federal
floor. On election night, higher wages were approved in four more states
by 2020.

President-elect Trump had spoken out in support of a $10 federal minimum
wage while on the campaign trail. But small business is advocates are
hopeful that raising the wage won`t be a priority for the new



HERERA: And that is NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thanks for joining us. Have a great evening. And we`ll see you here


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) 2016 CNBC, Inc.


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