Nightly Business Report – March 8, 2019

ANNOUNCER:  This is NIGHTLY BUSINESS REPORT with Sue Herera and Bill
Griffeth.  

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR:  Hiring hits the brakes.  
The economy created far fewer jobs than expected last month, just 20,000.  
Is it a sign we`ve hit peak employment?  

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR:  Building equity.  If you`re a
homeowner, you might be a lot richer than you were just a year ago.  

GRIFFETH:  Bright idea.  Meet the entrepreneurs who say the future of
retail is a brick-and-mortar store but with a modern twist.

Those stories and much more tonight on NIGHTLY BUSINESS REPORT for Friday,
March the 8th.

HERERA:  Good evening, everyone, and welcome.  

The headline number was a shocker: 20,000 jobs created in February, well
below the 180,000 estimate.  The gain in nonfarm payrolls was the slowest
pace for job growth since December of 2017, but the unemployment rate did
dip to 3.8 percent and wages ticked higher.  And job growth in the two
prior months was strong, leaving some to wonder if this is just a one-month
aberration or a sign that the hottest part of the economy may be starting
to slow.  

Steve Liesman starts us off tonight.  

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  This was a miss for
the ages.  Wall Street looked for a reasonably strong jobs report of
180,000 created in February.  The real number, just 20,000.  

The Wall Street economists haven`t been this wrong since the 238,000 miss
in November of 2008.  That is in the middle of the great recession.  

But rather than fearing the worst, most economists think the number is more
noise than signal.  

ED LAZEAR, FORMER PRESIDENT`S CEA CHAIRMAN:  This is about as internally
inconsistent a report as I think I`ve ever seen.  And if there are ever a
month where you want to wait until next month and see what happens, this
would be it.  

LIESMAN:  While job growth was low, unemployment measured in a separate
survey fell.  While the workweek declined, hourly earnings were up
strongly.  So what`s going on?  

One culprit could be a very snowy and cold February.  Construction jobs
fell by 31,000.  The government shutdown ended the month before might have
played havoc with the data.  

It could also have been just a snap-back from a really strong number in
January.  And every now and then, data can be an outlier to the real trend.  
The danger is this wasn`t noise.  

DIANE SWONK, GRANT THORNTON CHIEF ECONOMIST:  I still do think the risk of
recession is high for 2020.  I did not as optimistic even if we get a trade
deal with China, that the weakness preceded the trade weakness and their
ability to stimulate is not as strong as it once was.  

LIESMAN:  We won`t know until march if the number was right and pointing
out a weakening U.S. economy or, as many hope, it was way off target.  

For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.

(END VIDEOTAPE)

GRIFFETH:  Well, let`s turn to Luke Tilley right now for more analysis of
today`s jobs number.  He`s chief economist at Wilmington Trust (NYSE:WL).

Luke, good to see you.  Thanks for joining us tonight.  

LUKE TILLEY, WILMINGTON TRUST CHIEF ECONOMIST:  Thanks for having me on.  

GRIFFETH:  So what do you think, aberration or something else going on?  

TILLEY:  It`s certainly an aberration in our view.  It really doesn`t fit
with the other indicators that we`re seeing in the economy.  Principally,
surveys of businesses indicate that they are still looking to hire.  And
also, the number of job openings in the economy is at all-time record
highs.  

So what we see here is a little statistical aberration.  And as was
suggested in Steve`s report, probably a little bit of impact from storms
and the government shutdown.  

HERERA:  So, you would disagree with those who say we`ve reached peak
employment?  

TILLEY:  Yes, I don`t think we`ve reached peak employment yet.  We still
have a very strong labor market in the sense that those employers are
looking for workers.  Really, the limiting factor on growth is their
ability to find them.  The unemployment rate is so low that they`re having
trouble finding them and that`s what`s pushing up those wages to the 3.4
percent that Steve mentioned that is now high for this cycle.  

GRIFFETH:  But we are at a point where the International Monetary Fund has
lowered its growth targets for the global economy this year.  The European
Central Bank just this week lowered its growth forecast for Europe.  We`ve
been hearing about the problems in China and our own economy as well.  

So, aren`t we at a point now where you would think that hiring would start
to slow at some point?  

TILLEY:  We think it would start hiring — the hiring would start to slow
at some point.  We don`t want to be whistling by the graveyard here.  There
are a lot of indicators that we do have a slowdown in the global economy.  
We`re not disputing that at all.  We have a slowdown in the U.S. economy
for about 3 percent growth in 2018.  Wilmington Trust (NYSE:WL) thinks it`s
going to be just 2 percent in 2019.  

But that still doesn`t make this morning`s job report very accurate.  We
still think it was an aberration, but we are looking at all of the signals
— business investment, consumer spending, the next jobs report to see if
there is indeed a weaker economy ahead of us.  

HERERA:  You`re watching very closely participation from those in the age
group of 25 to 54.  Now, granted that`s a widespread, but why are they so
important in your work?  

TILLEY:  They`re so important because they`re a better indicator of what`s
going on in the labor force.  So, a lot of people will focus on the overall
labor force participation rate, but that includes the baby boomers who are
retiring of their own volition.  That 25 to 55-year-old cohort has
increased their participation dramatically over the past two years, adding
millions of people to the labor force.  That is the single most important
thing going on in the labor market right now and is helping employers fill
those positions.  

GRIFFETH:  Very good.  Luke Tilley with Wilmington Trust (NYSE:WL) —
again, thanks for joining us tonight, Luke.  

TILLEY:  Thank you.  

HERERA:  On Wall Street the stock market closed out its worst week of the
year just one day before the bull market turns ten.  Today that anemic jobs
report did little to excite investors, as did new data out of China which
showed a 20 percent slump in exports from a year ago.  Those economic
growth concerns pressured stocks, though the major averages finished way
off of their worst levels of the day.  

By the close, the Dow Jones industrial average fell 22 points to 25,450, it
had been down more than 200.  The Nasdaq was down 13 and the S&P 500 slid
five.  For the week, the indexes were all off 2 percent or more.

And we also want to look at the transportation index which is now down for
10 straight sessions, its longest losing streak since 1972.

GRIFFETH:  But there was some positive news on the economy out today.  
Housing starts rebounded in January.  They were up more than 18 percent on
a rise in single family home construction.  That followed four straight
months of declines.  And even though home prices have been cooling a bit
recently, homeowners are still very much in the money.  

Diana Olick takes a look on a new report that shows a big rise in home
equity.  

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Strong demand for
housing last year kept home prices surging, and that means more homeowners
are sitting on more cash in the form of home equity.  Collectively,
homeowners with mortgages saw their equity increase by just over 8 percent
last year, according to Core Logic.  That`s a combination of value gains
and paying down their mortgages.  And it`s a collective $678 billion, or
about 9,700 bucks per homeowner.  

Of course, all real estate is local, and so are the gains.  Homeowners in
western states saw the biggest annual increases in home equity with Nevada
homeowners now about $29,000 richer.  Californians just short of $20,000.  
Washington state, New York and Florida also saw big gains.  

But there were losses.  Homeowners in North Dakota, Louisiana and
Connecticut saw their equity drop.  

Rising equity also meant more homeowners who were underwater on their
mortgages finally came up for air.  The number of homeowners who owe more
than their homes are worth dropped last year, but that number is still
above 2 million.  Rising equity often results in more cash-out refinances
or second home equity loans, meaning more spending by consumers who feel
more wealthy.  That could translate into bigger gains for the remodeling
industry later this year, as homeowners take out more cash just to put it
back in for remodels or upgrades.  

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Washington.  

(END VIDEOTAPE)

HERERA:  It`s time to take a look at some of today`s “Upgrades and
Downgrades”.  

ExxonMobil`s rating was cut to market perform from outperform at Cowen.  
The analyst cites concerns over its investment strategy.  The price target
is $75.  The stock fell more than 1 percent to $79.01.  

Netflix (NASDAQ:NFLX) was downgraded to neutral from buy at Buckingham.  
The analyst cites concerns over new competitive threats and the departure
of its chief marketing officer.  The price target is $382.  The shares fell
a fraction to $349.60.  

The cannabis company Tilray was initiated with an underperform rating at
Jefferies in new coverage.  The analyst cites the stock`s valuation.  The
price target is $61.  Despite the new rating, the stock rose a fraction to
$70 even.  

GRIFFETH:  Still ahead, looking for some value in your stocks?  Well, this
week`s market monitor has some food for thought on that subject.

(MUSIC)

GRIFFETH:  The United Kingdom is scheduled to leave the European Union in
just three weeks, and still, there is no approved plan that outlines
exactly how that`s going to happen.  Now, that has created a lot of
uncertainty for many businesses, especially those in the steel industry,
which has been thriving.  

Willem Marx is in Halesowen, England, for us tonight.  

(BEGIN VIDEOTAPE)

WILLEM MARX, NIGHTLY BUSINESS REPORT CORRESPONDENT:  Alex Crowe has spent
most of his adult life around giant slabs of molten metal.  He`s the
production director at Somers Forge in Great Britain.  

How many people work here overall?  What`s the total workforce?

ALEX CROWE, SOMERS FORGE:  It`s around 120 people.  

MARX:  Somers produces highly specialized steel products used in
submarines, ships and across the energy sector.  And at this family-owned
firm that dates back to 1697, business is booming, despite Brexit
uncertainty.  

The steel sector here in the United Kingdom has a long and proud history as
a global powerhouse, but experts say that its European union membership in
recent years has provided bigger benefits to steel makers in terms of
propped-up prices and increased employment than to any other U.K. industry.  

In the event of a no-deal Brexit, the percentage of total U.K. steel
exports facing trade restrictions, including tariffs, could swing from 15
percent to 97 percent by the end of this month.  Higher shipping and admin
costs could also total $92 million a year for steel exporters.  

Tammy Inglis is the FD at Somers.  She admits U.S. steel tariffs have hurt
her firm`s finances recently, but says a hard Brexit could mean much harder
times for many peers.  

TAMMY INGLIS, SOMER FORGE LTD. FINANCE DIRECTOR:  Steel prices I think
would fall.  The steel industry would suffer.  Somers Forge I don`t think
would suffer.  

MARX:  Do you feel like you`ve had a partner in government in a sense
that`s helped you plan?  

INGLIS:  No, I don`t think we`ve had the visibility that business needs.  I
think because of the way Somers operates, we haven`t felt the adverse
impact of that.  We`ve still invested, we`ve still recruited.  

MARX:  The firms with a weaker pedigree and cash positions in an industry
that`s already feeling the squeeze, no politician can promise Brexit won`t
spark significant and lasting damage.  

For NIGHTLY BUSINESS REPORT, I`m Willem Marx, Halesowen, England.  

(END VIDEOTAPE)

HERERA:  A big move higher for Big Lots (NYSE:BIG), and that`s where we
begin tonight`s “Market Focus”.  

The bulk discount retail chain reported better-than-expected earnings and
revenue.  The company also saw same-store sales rise more than 3 percent
for the second consecutive quarter.  The CEO attributes the solid results
to remodeled stores and marketing efforts.  Big Lots (NYSE:BIG) was up lots
today, nearly 14 percent to $36.18.  

Navistar missed on earnings but revenue beast forecast.  The truck and bus
manufacturer was hurt by one-time pension expenses.  Navistar also set
strong full-year guidance.  Shares fell more than 3.5 percent to $33.85.  

GRIFFETH:  Vail Resorts` second quarter earnings topped estimates but the
ski resort operator did reiterate that it is lowering its 2019 guidance due
in part to fewer guests visiting its U.S.-based resorts during the
preholiday season.  Vail also, by the way, announced a 20 percent increase
in its dividend and shares rose nearly 7 percent today to $216.55.  

Citrix Systems (NASDAQ:CTXS) has been hacked.  The networking software
company said today it has taken action to fix the problem and that the
unauthorized access was possibly done by international cyber criminals.  
Citrix did contact the FBI and is cooperating with that agency`s
investigation.  Shares fell more than 2.5 percent today to $99.98.  

HERERA:  It is time now for our weekly market monitor, who likes food
stocks.  He says there is value in food, but it`s all about picking the
right company.  This is his first time on the program, so we welcome Kevin
Dreyer, co-chief investment officer of value at the Gabelli Funds.  

Nice to see you, Kevin.  Welcome.  

KEVIN DREYER, GABELLI FUNDS CO-CIO OF VALUE:  Hi, thanks for having me.  

HERERA:  So, everybody has got to eat, but to your point, there are a lot
of players in the food space.  You picked three that you think will
continue to perform well.  One — and they all have a big footprint, but
Conagra is your first pick.  Why?  

DREYER:  Yes.  So, Conagra really is focused in a couple of areas.  One is
snacking and the other is frozen foods.  So, these are two of the faster
growing areas within the food sector.  They have leading brands like
Banquet, Healthy Choice, Marie Callender`s and many others.  They just
bought another company, Pinnacle Foods, which we think that management, CEO
Sean Connolly, is going to be able to do quite a bit better with those
brands, putting them together with their own.  

GRIFFETH:  Another one you have, Kevin, is Hain Celestial.  They`re into
everything from seasoning to yogurt.  

I just looked at a five-year chart today.  Four years ago, this was a $70
stock.  Today, it`s a $20 stock.  They have a relatively new CEO, just
started last fall.  I guess you`re placing a big bet on him.  Yes?

DREYER:  Yes.  So, this is a bit of a turnaround play.  Hain is really
focused on the natural and organic market which is only about $80 billion
out of $800 billion food market in the U.S.  But that market is growing
about 8 percent, versus 1 percent for overall foods.  So, they`re really
focused on the right areas but they just need to restructure the business a
bit.  

So, we think that new management is going to be able to come in and do
that.  And then they should get more than their share of the growth of
that, faster growing natural and organic segment.  

HERERA:  Next is Mondelez.  It`s not only a domestic play, but it`s an
emerging markets play as well.  

DREYER:  Yes, exactly.  The other two were a little bit of turn-around
plays.  This one is really a high-performing company.  They`re in snacking.  

They have well-known brands like Cadbury, Ritz Crackers, many others.  And
40 percent of their business is in developing in emerging markets.  If you
look at certain markets like India, their scale is really unsurpassable by
other companies, so they have very, very deep roots in these markets which
is going to propel both top and bottom line for years to come.  

GRIFFETH:  So I`m curious, you`re picking food.  Is it because of the value
you see or are these just classic defensive plays at this cycle in the bull
market?  

DREYER:  I mean they should be relatively defensive in the scheme of the
market, but that` not why I`m pick.  They`re really very good businesses
that have some interesting things going on with all of them that we think
can serve as value in the next couple of years.  

GRIFFETH:  Very quickly.  If the global economies are slowing down, is
Mondelez vulnerable because of the percentage of their sales that they get
from overseas and emerging markets?  

DREYER:  To an extent.  But, really, when you see the emerging middle class
in all of these emerging markets, one of the first things consumers do is
they look to buy branded food and beverage products.  So, I don`t think
that would be one of the areas that consumers would look to be cutting.  

They are always subject to currency risk.

HERERA:  Right.

DREYER:  They have a sizeable U.K. business if there`s a hard Brexit.  So,
that is a risk that`s out there.  

HERERA:  Kevin, thank you so much for joining us.  

DREYER:  Thank you.  

HERERA:  Kevin Dreyer with Gabelli Funds.  

And coming up, retail returns to its roots with a new kind of brick-and-
mortar store.  It`s tonight`s “Bright Idea”.  

(MUSIC)

HERERA:  The U.S. women`s soccer team is suing the U.S. Soccer Federation.  
All 28 members of the world championship team allege gender discrimination
that affected everything from their pay to medical treatment to travel
arrangements.  They are seeking class action status so that past players
can join.  This lawsuit mirrors similar accusations made in a 2016
complaint filed by five players with the Equal Employment Opportunity
Commission.

GRIFFETH:  Well, today is International Women`s Day, and what better time
for Marvel`s first stand-alone female super hero movie to hit the silver
screen, which it`s doing this weekend.  And a lot is riding on the success
of this latest release.  

Julia Boorstin has more.  

(BEGIN VIDEOTAPE)

JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT:  “Captain Marvel”
may have the superpowers to turn around a struggling box office, with the
highest presales in a year.  The film is projected to gross up to $150
million in North America this weekend.  That would eclipse the $103 million
that the other female superhero, “Wonder Woman”, brought in over its
opening weekend two years ago.  

ERIK DAVIS, FANDANGO:  When you put a woman front and center in one of
these films, now there`s a lot more attention on it because the box office
is so big.  We`re talking hundreds of millions of dollars in the global box
office.  And so, “Wonder Woman” I think really kind of kicked off that
momentum in terms of this new era of superhero movies and “Captain Marvel”
is looking to sort of continue that.  

BOORSTIN:  The review so far had been good.  An 82 percent score on Rotten
Tomatoes.  And it`s not just Disney`s investment in $150-plus million
budget on the line.  Brie Larson`s character could drive or dampen interest
in the four other Marvel films coming this year.  

Up next, “Avengers Endgame” next month.  And then this summer, Sony`s
“Spider-Man: Far From Home”, and Fox soon to be owned by Disney (NYSE:DIS),
has two X-Men movies, “Dark Phoenix” and “The New Mutants”.  And theater
chains are counting on the superhero to lead a turnaround.  The box office
is down over 25 percent year-to-date.  

Not even accounting for inflation, this year is the lowest grossing start
to a year since 2011.  After last year, the box office hit a record,
bolstered by “Black Panther.”

DAVIS:  Anticipation is sky high.  This is going to be a $100 million
opener and it`s going to put the box office into an upswing and it`s going
to kick off a 2019 that is gigantic for Disney (NYSE:DIS).  

BOORSTIN:  Studios and theater chains alike are hoping this weekend will
kick off a box office turn-around.  The decline so far this year fueling
concerns that the rise of streaming alternatives is raising the bar for the
increasingly pricey trip to the movies.  

For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.  

(END VIDEOTAPE)

HERERA:  Retail stores are continuing to close in droves.  More than 4,000
are scheduled to shut their doors this year.  And if you`re a landlord
wondering what`s next, you might want to pay close attention, because a
trio of New York City entrepreneurs got the bright idea to create a space
billing itself as the world`s most interesting store.

(BEGIN VIDEOTAPE)

HERERA:  Shopping has always intrigued Tal Zvi Nathanel.  His mother
dressed store front windows in Israel and he`s inspired by the grand
department stores of the 20th century.  Selfridge in London is a favorite.  

TAL ZVI NATHANEL, SHOWFIELDS CEO AND CO-FOUNDER:  It was always about you
can stage anything that you want so there`s always a lot of magic.  

HERERA:  Arriving in New York back in 2012, though, he found the store
fronts lacking.  

NATHANEL:  The first thing I noticed was where`s the magic?  None of those
things that me and my friends are buying or interested in are there.  

HERERA:  The magic may have moved online.  New products, cheap prices, but
few digital startups have the time or the money to find and open physical
stores.  

So, Nathanel and his team opened Showfields in December of 2018.  Located
in downtown Manhattan, it`s a gallery of pop-up stores and works of art.  
Yes, that`s for sale too.  

NATHANEL:  We want to offer you flexibility.  You don`t have to commit to
15 years, just come for three months or four months.  You don`t have to
commit to a specific store size.  You can try different types of footprints
(ph).

HERERA:  Short-term pop-ups can cost a quarter of a million dollars but
Showfields is renting spaces for $6,000 to $18,000 a month.  Nathanel and
his co-founders, Amir Zwickel and Katie Hunt, took a risk on a 15-year
lease with a landlord willing to try something different.  

NATHANEL:  Innovation in retail is something new.  They understand that
something new needs to happen.  You can only walk in here.  You get this,
wow.  People like to think that retail is dead.  Retail is completely not
dead.  

HERERA:  The first floor is home to wellness products like Frank Body, a
line of Australian coffee scrubs.  

NATHANEL:  You can try all of them here.  And then literally press the
button to vote.  

HERERA:  Quip has sold a million electric toothbrushes online, but it
wasn`t equipped to find a physical space.  

SIMON ENEVER, QUIP CEO AND CO-FOUNDER:  You have to think through all the
operations and logistics and then start from scratch to build that
experience.  And with Showfields, of course, you get a kind of a helping
hand the whole way.  

HERERA:  It`s a problem Hunt has seen before.  She was employee number
three at eyeglass maker Warby Parker which began online and now has about
90 stores.  

KATIE HUNT, SHOWFIELDS CO-FOUNDER:  We didn`t have that ability on the team
and we actually had to hire for it.  I want to take that fear out of the
decision for the brands that we`re working with.  

HERERA:  Zwickel is leading the hunt to find and design more retail spaces.  

AMIR ZWICKEL, SHOWFIELDS CO-FOUNDER:  Tal comes from the consumer world and
I`m from the real estate world.  And both of us recognize the same problem
from different sides of the business.  

HERERA:  First, Showfields will expand upstairs.  Later this month,
shoppers will get access to a slide connecting the third floor to the
second.  On the fourth floor, an event space and an outdoor terrace, each a
nod to the old department store magic.  

NATHANEL:  It`s a big thing to try to walk in the footprints of giants like
that.  But it also gives us a lot of power when we look ahead.  

(END VIDEOTAPE)

HERERA:  And that building in Greenwich Village was home to the first
animal hospital in the United States.  So the co-founders like to think it
has good karma.  They are hoping to begin work on sites in other major
cities later this year.  

GRIFFETH:  Before we go, one final look at the day and the week on Wall
Street.  Five straight down days, finishing with today down 22 points on
the Dow.  The Nasdaq was down 13, the S&P down just 5.  And for the week,
down 2 percent plus, the worst week of the stock market in 2019.  

HERERA:  Wow.  

That does it for NIGHTLY BUSINESS REPORT tonight.  I`m Sue Herera.  Thanks
for watching.  We`d like to remind you this is the time of year your public
television station seeks your support.  

GRIFFETH:  I`m Bill Griffeth.  Thank you very much for that support.  Have
a great weekend.  We`ll see you Monday.

END

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