Transcript: Nightly Business Report – December 2, 2016

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR:  Help wanted.  Companies
are hiring, the unemployment rate is falling.  But not everything is going gangbuster.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  Strategic advice.  Donald
Trump picks a who`s who of corporate America to advise him on the economy.
But there`s one group noticeably missing.

MATHISEN:  Girl power.  Female action figures are invading the toy aisle,
thanks to the bright idea of a mom turned entrepreneur.

Those stories and more tonight on NIGHTLY BUSINESS REPORT for Friday,
December 2nd.

HERERA:  Good evening, everyone.  And welcome.

Seventy-four straight months of job creation.  Employers continue to add
workers at a steady clip last month, and the unemployment rate dropped to a
nine-year low.  According to the Labor Department, 178,000 jobs were
created in November.  The unemployment rate fell to 4.6 percent.  But
that`s because more Americans left the work force.  And wages, which had
been rising, fell.

So, despite the labor market being described as solid, some questions still
remain.  But as Hampton Pearson reports, that may not deter the Federal
Reserve.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT:  The November jobs
report, which included the lowest unemployment rate in nine years, may be
the last hurdle to fall as Federal Reserve considers raising interest rates
for the first time in a year.  Leading economists say when monetary
policymakers meet in two weeks, markets will be focused on what the Fed
says about the path of future rate hikes.

JAN HATZIUS, GOLDMAN SACHS CHIEF ECONOMIST:  Our expectation is three hikes
next year.  Currently they`re signaling two.  I wouldn`t really expect them
to necessarily change that, you know, in two weeks.  But I do think that
ultimately, we`re at full employment, I think.  And we`re still adding
170,000, 180,000 jobs a month.

PEARSON:  The drop in the unemployment rate to 4.6 percent had cross
currents.  More people found jobs, but more than 400,000 Americans dropped
out of the labor force, triggering a decline in the labor force
participation rate to 62.7 percent last month.

Average hourly earnings actually declined to just under $26 an hour.
Earnings for the last 12 months, however, are up 2.5 percent.

Leading economists point out, those trends are consistent with an economy
approaching full employment.

DAVID KELLY, J.P. MORGAN FUNDS CHIEF GLOBAL STRATEGIST:  People think there
is this army of unemployed people out there who are going to steal their
jobs if they ask for a wage increase.  But that`s really a ghost army.
They don`t exist.  And so, some perceptions of the labor market are going
to improve.  I think that could spark stronger wage growth next year.

PEARSON:  While the tight presidential contest generated uncertainty for
both businesses and households, now the focus is on how to grow the economy
in the future.

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

(END VIDEOTAPE)

MATHISEN:  Lindsey Piegza joins now for more analysis on the November jobs
report, the economy and rising bond yields, which has been a part of the
economic scene for the past month or so.  She is chief economist at Stifel
Fixed Income.

Lindsey, welcome.  Good to have you with us.

The president-elect said he`s going to bring manufacturing jobs back, but
where is he going to find workers to take those jobs if we`re at 4.6
percent unemployment?

LINDSEY PIEGZA, STIFEL FIXED INCOME CHIEF ECONOMIST:  Well, remember, the
4.6 unemployment rate doesn`t take into account all of the discouraged
workers, all the marginally attached workers, all of the Americans that are
right now in temporary positions or part-time positions that would prefer
full-time employment.  So, when we take all of those Americans and we add
them back in, we`re talking about an unemployment rate closer to 10
percent, rather than 4.6.

So, there is still a number of Americans that would welcome the opportunity
for full-time job position in this country.

HERERA:  You know, I also was very surprised that hourly earnings actually
fell, and the Fed has been looking for a little bit of wage pressure and
they didn`t get it in this report.

PIEGZA:  No, they certainly didn`t.  And certainly, we see month-to-month
volatility, but really where we look for that trend is in that annual pay.
No, we were up to 2.8 percent, that fell back down to 2.5 percent, which is
only modestly above that 2.1 percent trend that we have seen since the end
of the great recession.

So, if, in fact, we were at a point of full employment, we would easily be
talking about 3 percent, 3.5 percent wages.  But instead, we`re still
talking about 2-ish percent growth, not necessarily indicative of a labor
market at that point of full employment.

(CROSSTALK)

MATHISEN:  Yeah, so you just don`t buy that argument at all, that we`re
near full employment.

PIEGZA:  I really don`t.  No, I think right now there is still a tremendous
amount of slack, again, when you add in all of those Americans that have
dropped out of the labor force.  And these are Americans that are age 20 to
55 years old.  So, these are people with still a significant number of
potential income-earning years still left.

And once conditions do begin to improve, we would expect them to come back
into the labor force, then putting upward pressure on the unemployment
rate.  So, still a big uncertainty.

MATHISEN:  But aren`t there a lot of unfilled job openings?  Are these
people really as discouraged as those numbers would suggest?  In other
words, are they on the sidelines because some would say it`s more
comfortable for them to stay there?

PIEGZA:  Well, I think there`s a number of factors at play here.  Some may
not want to take a position earning 80 or 60 cents on the dollar of maybe a
job they had prior to the great recession.  But also, many of the job
openings have a requirement for skills that many of the unemployed don`t
have.  So, right now, we particularly see openings in accounting,
engineering, craft labor, but many of the unemployed Americans simply can`t
fill those positions with their current skill set.

HERERA:  Before we let you go, the rise in bond yields that we have seen so
recently has been pretty darn steep.  What do you make of that?  What is
the market telling you?

PIEGZA:  Well, I think right now, the market is being driven by optimism.
Optimism that a new administration coming in is going to usher in a period
of accelerated growth, heightened inflation and much improved labor market
conditions.  But like we saw in the taper tantrum of 2013, when bond yields
rose over a hundred basis points in a short period of time, they overshot a
more sustainable trading range.

And so, once we start to see investors juxtapose this optimism with a more
moderate reality, we do expect rates to come down to a more palatable
level.  In fact, we`re looking for the ten-year to fall back down towards 2
percent by the end of 2017 after maintaining this heightened range through
more of the first part of the new year.

MATHISEN:  Lindsey, thanks very much.  Have a great weekend.  Always good
to see you.

PIEGZA:  Thank you very much.  You too.

MATHISEN:  Lindsey Piegza with Stifel Fixed Income.

HERERA:  On Wall Street, stocks kind of treaded water.  The major indexes
did not make any big moves following the monthly jobs report.  Investors
may have been cautious ahead of a referendum in Italy this weekend.  We`ll
have more on that shortly.

Today, the Dow Jones Industrial Average fell 21 points to 19,170.  The
NASDAQ added 4, and the S&P 500 was up fractionally.  For the week, the Dow
was up fractionally, while the NASDAQ lost more than 2.5 percent.

MATHISEN:  President-elect Donald Trump put together a panel of advisers
who will offer their opinions on economic matters.  They are all well-known
titans of business, and the group will be chaired by Blackstone`s CEO Steve
Schwarzman.

(BEGIN VIDEO CLIP)

STEVE SCHWARZMAN, BLACKSTONE CHAIRMAN AND CEO:  If possible, he asked me if
I would form a group of terrific people who were experienced and wise and,
you know, sort of experts in their field to join for meetings where he
would be able to learn from them with meetings on a regular basis.  And I
should pick the people, and he would review them.  And he loved them all.

(END VIDEO CLIP)

MATHISEN:  The members of the panel include the CEOs of General Motors
(NYSE:GM), JPMorgan (NYSE:JPM), Blackrock, Disney (NYSE:DIS), Walmart, a
former Boeing (NYSE:BA) CEO, IBM`s chief executive, and the former CEO of
General Electric (NYSE:GE).

But if you do notice, there is no one on the list specifically from Silicon
Valley.  The first meeting will take place in February.

HERERA:  The president-elect`s deal with Carrier to keep 1,000 jobs from
going to Mexico is drawing divided reaction.  And some of the most negative
responses have come from south of the border.

Michelle Caruso-Cabrera reports tonight from Monterey, Mexico.

(BEGIN VIDEOTAPE)

MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT:  There are
3,000 Carrier employees in Mexico already.  That number was supposed to
rise to 5,000, but following the deal with President-elect Donald Trump,
that`s not going to happen.  Instead, the number will rise to only 4,000.

Jaime Garcia`s job is to attract as much foreign investment as possible to
the region.  He`s worried about Donald Trump.

JAIME GARCIA ASTORGA, SEC. OF ECON. DEVELOPMENT, SANTA CATARINA:  This is a
learned lesson for our city, this is a learned for our state.  The
president — the President-elect Trump has made a lot of declarations that
I think nobody believes that he serious on his actions.  Mr. President
Trump is telling the truth.

CARUSO-CABRERA:  There are many U.S. manufacturers here in the more than
120 industrial parks that dot the landscape.  A quick drive shows names
like Caterpillar (NYSE:CAT), Ryder, Johnson Controls (NYSE:JCI), Owens
Corning (NYSE:OC) (NYSE:GLW).  And Mexico exported 2 million vehicles to
the U.S. last year.

American companies come to northern Mexico because of easier regulations
and lower wages.

The leader of the local union with nearly 100,000 members says industrial
workers here make the equivalent of $120 a week, and that`s a good salary.
He says the workers are treated fairly.

Also crucial, Mexico has free trade agreements with more than 40 countries.
That`s double the United States.  That means products made in factories
like this one are far more likely to be tariff-free when they`re shipped to
other countries.

President-elect Donald Trump says he wants to rip up the free trade
agreement between Mexico and the U.S., known as NAFTA.  But senior leaders
in Mexico say they think a businessman like Trump will eventually decide he
shouldn`t.

FERNANDO TURNER, SEC. OF ECON. 7 LABOR, NUEVO LEON:  And right now, I mean,
I think for political reasons, he is doing this.  But he is going to
understand sooner or later that we are like Siamese twins here.  We are too
much — living together.  If we were to separate that, that`s going to cost
the United States a lot, as well as in Mexico.

CARUSO-CABRERA:  As for now, though, Trump doesn`t see it that way.

For NIGHTLY BUSINESS REPORT, Michelle Caruso-Cabrera, Monterrey, Mexico.

(END VIDEOTAPE)

HERERA:  And to read more about Mexico`s reaction to the Carrier plant
decision, head to our website, NBR.com.

MATHISEN:  It`s being reported that president-elect Trump received a phone
call from Taiwan`s president to congratulate him on his victory.  It is a
thorny issue, because the U.S. cut off diplomatic relations in 1979.  The
risk angers China, our top trade partner, which considers Taiwan a renegade
province.

And still ahead, tech stocks have not rallied like the rest of the market,
and that may be why our market monitor is buying names in that sector.

(MUSIC)

HERERA:  A Federal Reserve official today defended the Wall Street reforms
known as Dodd/Frank.  Governor Daniel Tarullo criticized a Republican
proposal to replace those regulations, and cautioned against simplifying
the rules too much.

(BEGIN VIDEO CLIP)

DANIEL TARULLO, FEDERAL RESERVE BOARD OF GOVERNORS:  I do not think there
is a sound economic case for generally weakening the regulatory
requirements applicable to the largest banks.  And I certainly do not think
the taxpayers should bear the risk that would be entailed by any such
weakening.

(END VIDEO CLIP)

HERERA:  Mr. Tarullo added, it is critical we not forget our recent
financial history.

MATHISEN:  The power of populism.  Brexit was the first surprise, followed
perhaps by Donald Trump`s election to recall victory.  Next country to face
a critical vote, Italy.

And as Julia Chatterley reports from Rome, this vote is viewed as a
referendum on both political and economic change.

(BEGIN VIDEOTAPE)

JULIA CHATTERLEY, NIGHTLY BUSINESS REPORT CORRESPONDENT:  At Chicco de
Grano in Rome, choosing which pizza to order isn`t the only tough decision
owner Ciro Biancolino and his fellow Italians have to make this weekend.

CIRO BIANCOLINO, CHICCO DE GRANO OWNER:  And it can be confusing, I tell
you.  Like many Italians, it`s confusing.

CHATTERLEY:  Italians will head to the polls on Sunday to vote yes or no in
a referendum on constitutional reform.  The point?  To reduce the size and
power of the government.

BIANCOLINO:  We don`t need too many people to be in the government.  We
have about 900 people, but we don`t need all of these people.

CHATTERLEY:  A smaller government that could ultimately lead to a more
stable one, too.  Italy has had 63 of them in just 70 years.

So, it shouldn`t matter to anyone outside of Italy, except it does, because
Prime Minister Renzi promised to resign if the no vote wins.

So, it`s also become a de facto confidence vote on Renzi, and a way for all
of the other political parties to club together to try and oust him.

In addition to that, the technicalities of this vote are pretty complex.
Leaving a number of people questioning to what extent voters truly
understand the full implications of their decision.

FEDERICA CAPRETTI, ITALIAN VOTER:  The problem is the interpretation,
because the referendum has different interpretation.

CHATTERLEY:  It`s no surprise then that up to one-third of people here are
still undecided.  But whatever the reason for the vote, the result is
clear.  A no vote means Prime Minister Renzi will likely step down on
Monday.  Then, the search will begin for his replacement.

Now, Renzi will likely hold the fort in the short term, and this is
important, but as the country`s finance minister pointed out just this
morning, the uncertainty created by that no vote could pull more pressure
on bank stocks in particular.

This is just one of many votes in Europe in the coming months where both
protest votes and populism could play a pivotal role.

For NIGHTLY BUSINESS REPORT, I`m Julia Chatterley in Rome.

(END VIDEOTAPE)

HERERA:  Pandora is reportedly warming up to the idea of selling itself.
And that`s where we begin tonight`s “Market Focus”.

Sources who spoke to CNBC said the music streaming company is ready to
discuss a takeover deal with satellite radio service SiriusXM.  Earlier
this year, the “Wall Street Journal” reported that Pandora rebuffed a $15 a
share offer from SiriusXM majority owner, Liberty Media.  But a conflicting
report from “Reuters” says Pandora is making no new effort to sell itself.

Well, the market kind of decided that Pandora shares should go up.  So,
they soared to $13.33, while shares of SiriusXM fell 5 percent to $4.30.

Big Lots (NYSE:BIG) raised its earnings outlook for the year after posting
a better than expected profit, but same store sales and overall revenue
missed estimates.  The discount retailer shares rose 1 percent to $51.39.

MATHISEN:  Alleghany (NYSE:Y) Technology suspended its quarterly dividend
as the company works to focus efforts on returning to sustainable
profitability.  The metals maker said that its annual free cash flow will
be used to reduce debt and improve liquidity.  Shares fell more than 4.5
percent to $16.93.

The American International Recruitment Council said it would investigate
New Oriental Education and Technology Group following a “Reuters” report
saying the Chinese private educator committed college application fraud.
Citing current and former employees, the report said that New Oriental
counselors sometimes falsified students` high school transcripts and wrote
their personal statements in an effort to gain them acceptance into
prestigious U.S. universities.  Shares plummeted 14 percent to $42 even.

HERERA:  Our market monitor guest likes tech stocks and says he has some
names that should be in your portfolio, at least three to five years, maybe
longer.  Last time he was on in October of 2015, he recommended Facebook
(NASDAQ:FB), which is up 13 percent, Amazon (NASDAQ:AMZN) which is up 18
percent, Gilead Sciences (NASDAQ:GILD), which is down 30 percent.

He is Lew Piantedosi, portfolio manager over at Eaton (NYSE:ETN) Vance.

Lew, welcome back.  Nice to have you here.

LEW PIANTEDOSI, EATON VANCE PORTFOLIO MANAGER:  Thanks for having me, Sue.

HERERA:  Let`s get right to your picks.  You still like Facebook
(NASDAQ:FB).  Tell us why.

PIANTEDOSI:  We do.  We think in this environment, where investors are kind
of, you know — there has been this big rotation in the market where
investors are kind of shunning a lot of the more secular and stable growers
of the market and employing a lot of the capital into the more cyclical
growth areas, in effect throwing the baby out with the bath water.  And
it`s very rare, very rare opportunity with Facebook (NASDAQ:FB) where you
can buy this unbelievable franchise for kind of a high teens multiple in
just has tremendous earnings growth going forward.

MATHISEN:  Let`s move on to number two, which is, once again, Amazon
(NASDAQ:AMZN).  Get me past the valuation issue here.  I know there are
lots of different ways you can calculate it.  But some ways if you
calculate it, like on gap earnings, put the valuation at 300 times or
something.

PIANTEDOSI:  Yes.  We don`t look at it that way.  In our Eaton (NYSE:ETN)
Vance growth opportunities fund, what we`re seeking out are these big
picture secular growth trends or what we call mega trends.  And Amazon
(NASDAQ:AMZN) is a leader in two of them.  One, Internet retail, which is
the obvious play, and then Amazon (NASDAQ:AMZN) web services, which is much
smaller but a very, very profitable and quickly growing part of that
business.

If you do kind of a sum of the parts analysis, if Amazon (NASDAQ:AMZN) web
services was a stand-alone business, we believe that business would be
worth north of $100 billion, which leaves the retail business at one-and-a-
half times revenue.  We think they still have plenty of share to take
forward and will be a dominant provider of online services going forward.
And that`s why we like the stock today.

HERERA:  And we`ll finish up with Broadcom (NASDAQ:BRCM).

PIANTEDOSI:  Yes, Broadcom (NASDAQ:BRCM), again, playing into these big-
picture secular themes.  Semiconductor company that is in — that has
positive end markets in wireless connectivity in the data center.  They
have done a great job of integrating a lot of their acquisitions.  Broadcom
(NASDAQ:BRCM) being the biggest, but still a lot of upside to come within
that integration.  And stock trades at a very, very cheap multiple here.

MATHISEN:  Lew, I was just going to say, maybe you should tell all those
people still working there, they can take the rest of the day off.

(LAUGHTER)

MATHISEN:  There`s not a soul there.  Thanks for staying late for us.

PIANTEDOSI:  Sure, my pleasure.

MATHISEN:  All right.

HERERA:  Lew Piantedosi with Eaton (NYSE:ETN) Vance.

All right.  Coming up, heroes that save the world?  A Kickstarter campaign
and the entrepreneur who gave girls a new way to play — it`s tonight`s
“Bright Idea.”

(MUSIC)

HERERA:  Health care spending rose nearly 6 percent last year, its fastest
pace since 2007.  According to a new government report, medical spending
totaled more than $3 trillion primarily because more people had health
insurance through the Affordable Care Act.

MATHISEN:  Action figures account for about $1.5 billion in the $20 billion
U.S. toy industry.  You couldn`t buy an original female action figure,
though, one that wasn`t based on a movie or a comic book character until a
New York City mom got the bright idea to put some girl power into the
market.

(BEGIN VIDEOTAPE)

MATHISEN:  It`s one thing to draw inspiration from the heroine hall of
fame.  It`s quite another to enlighten a future heroine.

CLEMENTINE WAUGH-BACCHUS, SECOND GRADER:  It kind of stands out for girls,
where heroes, they basically save the world.

MATHISEN:  Julie Kerwin, the mother of two boys, wondered back in 2012 why
super hero toys from Superman to Harry Potter to “Star Wars” all seemed to
be male or male-oriented.

JULIE KERWIN, IAMELEMENTAL CREATOR AND CEO:  We were asking ourselves why
does Spiderman appeal to a boy of 4 and a man of 40, but there is no female
equivalent.

MATHISEN:  Her solution, focus on not creating a new super hero but instead
on super powers.

KERWIN:  I took a blank table of elements and started writing in character
traits.

MATHISEN:  Hence the name, IAmElemental.  Its debut series, Courage,
consists of seven female action figures, each representing a trait that
defines courage.

KERWIN:  They are bravery, energy, honesty, industry, enthusiasm,
persistence and fear.

MATHISEN:  Along with a friend, Dawn Nadeau, who has since left the
company, Kerwin began testing her ideas with friends.

KERWIN:  There was no toy, and we started getting the most amazing e-mails
back from our friends, saying, “I cannot believe the conversation that I
just had with my child.”

MATHISEN:  Kerwin poured a few thousand dollars into two years of research
and design tweets, leading up to a Kickstarter campaign in May of 2014.  In
just two days, IAmElemental hit a $35,000 goal.  A month later, Kerwin had
2,500 backers in 50 states, and on six continents, raising $163,000.

KERWIN:  We had really a run-away success on our hands.

MATHISEN:  The rare Kickstarter breakout got the attention of “Time”
magazine, naming IAmElemental one of its 25 top inventions and one of its
top ten toys of 2014.

Investors called, so did film and TV reps.  Target (NYSE:TGT) wanted
IAmElemental on its store shelves.  But Kerwin has resisted temptations to
go big too quickly.

KERWIN:  You cannot put my figure on a shelf in target next to “Frozen”,
because no one is going to buy something they have never heard of.

MATHISEN:  Instead, the figures are sold online and in about 50 smaller
specialty toy stores around the country.  Prices start at $25.
IAmElemental not yet profitable, but Kerwin says it might well be in 2017.

KERWIN:  Ironically, while I sell super powers, I don`t have enough power
yet to dictate how the story goes.

MATHISEN:  A story told in part by Kerwin`s customers.  For the just-
released second series, Wisdom, a New York City second grader helped Kerwin
explain one of the super powers, mastery.

KERWIN:  Her teachers taught her practice makes progress.  Instead of
practice makes perfect.  You want to explain to Alver (ph) why?

WAUGH-BACCHUS:  Because basically nothing is perfect.

MATHISEN:  The type of best practice that might bring out the super hero in
any of us.

KERWIN:  All kids should know that real heroes walk among us and share,
everyone`s powers grow stronger.

(END VIDEOTAPE)

MATHISEN:  Julie Kerwin has five more superpower sets sketched out, ready
to go in production.  She is still getting noticed too.  Last week, the Toy
Industry Association nominated IAmElemental for two awards, action figure
of the year and rookie of the year.  Winners to be announced in February at
the New York Toy Fair.

I think it`s a matter of time before she gets into stores like Target
(NYSE:TGT).

HERERA:  I think so too.

MATHISEN:  Shouldn`t sell herself short.

HERERA:  I think you`re right and you`re going to cover it in February for
us, right?

MATHISEN:  We`ll be there.

HERERA:  Keep us posted.  Good.

That does it for NIGHTLY BUSINESS REPORT for tonight.  I`m Sue Herera.
Thanks for watching.

We want to remind you, this is the time of year your public television
station seeks your support.

MATHISEN:  And we thank you for your support.

I`m Tyler Mathisen.  Have a great weekend, everybody.  We`ll see you
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) 2016 CNBC, Inc.

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