Transcript: Nightly Business Report — April 3, 2015

NBR Thum ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: And good evening, everyone. And welcome to this special edition of NIGHTLY BUSINESS REPORT. I’m Sue Herera.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: And I’m Tyler Mathisen.

It’s finally time to put winter behind us we hope and finally gear up for spring. And as the seasons change we take a look at all of the things investors should be eyeing from employment to market outlook for the second quarter. We’ll even find out how things are looking for the class of 2015.

HERERA: But we begin tonight with the labor market. Wall Street was closed for Good Friday observances, but the government was open for business and released the March jobs report. While not common, it has happened before, since 1980 there have been 11 occasions when the March jobs report was released on Good Friday including more recently in 2012 and in 2010.

And even though there was no trading today, Steve Liesman was hard at work sifting through the numbers.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The government reporting a very weak job number for the month of March. In fact, it was the weakest number since December 2013. It broke a string of strong numbers that goes back to March of 2014, all of which were above 200,000. Not this time, payrolls coming in at 126,000 versus a consensus of 248,000.

The unemployment rate, though, did remain unchanged at 5.5 percent. February and January both revised down sharply, losing a combined 69,000 jobs in the revision.

One bright spot: average hourly wages were up 0.3 percent which beat consensus. Some analysts say that the weak number went right along with a softening of the economy in the first quarter and some weak economic data.

BRIAN BELSKI, BMO CAPITAL MARKETS: I think the report is mostly disappointing. It’s not bad news. It’s certainly not surprising news, especially considering the tone of corporate America coming out of fourth quarter earnings and really what we have seen in terms of estimates coming down for the rest of the year. So, corporate America is retrenching a little bit. We had bad weather in February and March. We know the story already. So, not too surprising.

LIESMAN: Among the sectors that lost jobs were manufacturing and construction, maybe a sign that weather played a role. But there was also an 11,000 jobs decline in mining, a sign that lower oil prices were taking a toll on jobs in the oil patch.

But places where there were job gains — retail, professional and business services and perennial job gainer, health care.

Question is whether the Fed looks through this number, or does give it pause in enacting the first-rate hike in nine years expected this year?

Markets certainly thought so with bond yields declining and the dollar also weakening. Markets get their first chance to look at the jobs number and react on Monday.

For NIGHTLY BUSINESS REPORT, I’m Steve Liesman.

(END VIDEOTAPE)

MATHISEN: Industries evolve, of course — some shrink and others grow. And it’s always important for workers to know where their skills are in demand. Manufacturing, for instance, is changing, becoming more automated, a trend that will cost some jobs, but add many others.

While the drone industry is still relatively new, could see big job growth over the coming years.

Mary Thompson now takes a look at both of these industries to find out where the jobs are.

(BEGIN VIDEOTAPE)

MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): For 20-year-old Marco Schoener, flying drones isn’t a hobby. It’s part of his education.

MARCO SCHOENER, EMBRY-RIDDLE AERONAUTICAL UNIVERSITY STUDENT: I’ve flown robotics since I was 9 years old. All through life, I decided I want to do this.

THOMPSON: Schoener is senior at Embry-Riddle Aeronautical University in Daytona Beach, Florida, one of a small but growing number of colleges offering bachelor degrees in unmanned aerial systems or drones.

ALEX MIROT, EMBRY-RIDDLE PROFESSOR: We started three years ago with 11 students and that grew, has grown to about 230 students.

THOMPSON: Professor Alex Mirot said the school launched the program anticipating growing for engineers to build and operators to run drones. Why? By September, the FAA will propose rules allowing drones to be used commercially, in fields like agriculture, movie-making, security, and maybe even delivery services.

STEVEN GITLIN, AEROVIRONMENT VP: Some people think that the commercial market for unmanned aircraft systems could be much bigger than the military market.

THOMPSON: Steve Gitlin is the vice president of AeroVironment (NASDAQ:AVAV), a maker of small drones sold mostly to the military. The firm is bracing for a pickup in demand and is hiring 100 workers this fiscal year to meet it.

(on camera): Once drones were OK’d for commercial use, the National Association of Unmanned Vehicles Systems International estimates the industry here in the U.S. could grow to over $13 billion in the first three years and rise to $82 billion by 2025, adding over 103,000 new jobs along the way.

MIROT: The salaries are usually tied to the difficulty and the qualification level of the individual, but anywhere from $50,000 stateside, and if they’re willing to take overseas engagement, can be high as $100,000, $125,000.

THOMPSON (voice-over): That’s good news for Embry-Riddle senior Jessica Brown who abandoned plans to be a pilot to concentrate on unmanned aerial vehicles or UAVs.

JESSICA BROWN, AERONAUTICAL UNIVERSITY STUDENT: If I could do anything with UAVs, I would love to do it, whether that’s being the actual pilot or just sensor operating, working the cameras and stuff like that.

THOMPSON: Stuff that no longer is part of science fiction, but an industry with strong growth potential in the real world.

A pioneer in robotics, iRobot (NASDAQ:IRBT) says the industry is catching fire.

RUSS CAMPANELLO, IROBOT EXECUTIVE VP: It’s a very hard market.

THOMPSON: So too is iRobot’s neighborhood, Bedford, Massachusetts. Eight years ago, you couldn’t find another robotics company for 150 miles.

Today, executive Russ Campanello says it’s a different story.

CAMPANELLO: From here, this location, you can probably touch about a hundred companies that are doing some form of robotics.

THOMPSON: The change reflecting a trend seen by Boston Consulting Group. It estimates robotic spending will hit $75 billion by 2025, up from estimated $27 billion this year. Company spending more as robots become easier to program and easier to afford.

Ten years ago, they cost $250,000, and now, some go for as little as $25,000. It’s an expense Boston Consulting Hal Sirkin says can lead to big savings for manufacturers who buy into the next 10 years of the robot revolution.

HAL SIRKIN, BOSTON CONSULTING GROUP: We’re thinking about something like a 16 percent drop in the labor cost for manufacturing plants over this time period.

THOMPSON: The industry’s driving adoption, computers, autos, electrical and machinery.

(on camera): How this impacts the labor market? Well, that remains the question. It’s expected that some manufacturers may bring work back from overseas if they find mixing robots and humans lowers cost enough. And then, of course, the industry is hiring too.

CAMPANELLO: Last year, we hired almost 100 people into iRobot (NASDAQ:IRBT). This year, we have plans to do about the same.

THOMPSON (voice-over): It seems strong demand for its products like PackBot, that’s used by security and defense firms, the Ava robot for teleconferencing.

(on camera): Hey, Charlene. How are you?

UNIDENTIFIED FEMALE: Hi, Mary. How are you?

THOMPSON (voice-over): And the Roomba Vacuum.

Engineer George Tall is working on 3D mapping, which he says might be used in future household robots.

GEORGE TALL, IROBOT ENGINEER: 3D maps would allow the robot to scan your house. If you tell it to go find your keys, it could search through that map, find your keys, go and grab the keys and give them to you.

THOMPSON: Like George Tall, iRobot (NASDAQ:IRBT) intern Eric Peterson became interested in robotics, playing with Lego as a kid. Now a high school senior, he sees a future in defense.

ERIC PETERSON, IROBOT INTERN: I can see what — where robotics can come into play in the military.

THOMPSON: All this as robots start playing a bigger role in the global workforce.

(END VIDEOTAPE)

MATHISEN: And Mary Thompson joins us now.

Let’s talk a little bit about the drones. Obviously, federal aviation regulations get into this in a big way and will effect how many jobs ultimately are made there.

THOMPSON: You know, from the time that I did this package until now the FAA did come out with regulations and they were pretty much expected. So, you know, there is expectations we could see a great number of jobs. But it’s going to take a while in large part because what’s different here in the U.S. as far as using drones, there are other countries that use them a lot, so the employment is greater. Countries like Canada.

But there are problems here in the U.S., well, not problems, but the situation is that we have personal pilots. You may have friends who have their own planes. Typically, those planes don’t have sensors that allow them to know that drones are there. So that’s the difference.

In other countries, there aren’t as many people with their own personal planes. You don’t have that level of involvement.

So, what we’re going to see is, yes, the industry will likely grow, but it will still take a couple of years to get the proper safety measures in place, again, because we have such high traffic here in the U.S. and we have varying degrees of the vehicles that are part of that traffic. We have to make sure that all are ready to detect the drones or the drones are ready to detect them because we don’t that collision to occur.

HERERA: Of course, not. Ty mentioned to the introduction to your piece that some jobs will be created by these new industries and some jobs will be lost.

Do we have an idea of net/net whether it’s going to be a positive job creating industry?

THOMPSON: With drones, it will probably be a positive.

I think with robotics it might be a little bit different. What you will see is that you will see an increase in high skilled jobs, probably a decrease in low skill jobs. While you may see some of them come back because manufacturing is back — brought back on shore, it probably won’t be enough to make up for a whole assembly line that’s gone.

HERERA: Right.

THOMPSON: So, what workers really need to do is up their skills.

MATHISEN: Yes, that is the key in the modern economy. Absolutely.

Mary, thanks very much.

THOMPSON: Sure.

HERERA: Thanks, Mary.

Well, it is that time of year again. College students are set to graduate and they’ll be out in the real world in a few weeks on the hunt for jobs.

So, how is the labor market looking for soon to be grads?

Hampton Pearson takes a look

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): Employers are recruiting college graduates at a rate not seen since the dot-com frenzy in 1999 and 2000, according to college job placement experts.

The improving economy and a big increase in baby boomer retirees are opening the doors for the next generation workforce.

MARILYN MACKES, NATIONAL ASSOCIATION OF COLLEGES AND EMPLOYERS: What happens is that over a period of years after this recession and we’ve had, you know, the gradual improvement of the economy, now we have employers facing the reality that they don’t have enough talent in the workforce, not just for now, but especially as they are looking to the future.

PEARSON: The most bullish forest, a 16 percent increase in hiring over last year, according to a Michigan State University survey covering 5,700 employers. Not far behind the National Association for Colleges and Employers survey predicting a nearly 10 percent rise.

MACKES: College graduates — they really compromise the pipeline for the future. They are really the people that employers are trying to bring on for, you know, developing their organization, ultimately even into the leadership of their organization in some cases.

PEARSON: With graduation day just weeks away, job fairs on college campuses are heating up. It’s a chance for job applicants and employers to be proactive.

Frances Holland from the Westin Hotel Group interviewed more than 40 job applicants at this recent job fair at the University of the District of Columbia campus.

FRANCES HOLLAND, WESTIN HOTEL HUMAN RESOURCES: Usually, the students are from a college perspective great because they’re coming in almost with a blank campus and kind of like, well, I want to try this, I want to try this, I want to try this.

PEARSON: For the graduates, job hunting is all about anxiety and competition. Landry Pimba wants a career in information technology, but he knows his first hurdle will be his lack of real world work experience.

LANDRY PIMBA, JOB SEEKER: I’m looking to get an internship, you know, in the field that I want to be in, you know, computer system and administration. An internship I think would be the best thing for me right now. You know, coming out with not a lot of experience is not so to get a full time job with a big company.

PEARSON (on camera): One last piece of advice for all those anxious graduates from the professionals: your first job will not be the defining moment of your work career. It’s the beginning of the world of work that professionals say will most likely include at least one career change.

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

(END VIDEOTAPE)

MATHISEN: Well, for the anxious new college graduate, our next guest is optimistic. He says this will be the best job market since the late 1990s.

He Gus Faucher, senior economist with PNC Financial Services Group.

Gus, welcome. Why so good this year?

GUS FAUCHER, PNC FINANCIAL SERVICES GROUP SENIOR ECONOMIST: Businesses are hiring. They are seeing stronger demand for their goods and services. They need more workers. They need new college graduates.

And so, this is a very good job market to be graduating into.

HERERA: Well, that’s good news. But will we see hiring across the board or are there specific industries that are stronger than others?

FAUCHER: Well, I think we will see generally strong hiring.

Most industries are expanding right now. I think information technology industries will be hiring, education and health care, consumer-oriented industries. Consumers are feeling more comfortable. We’re seeing better job growth and income growth.

So, pretty broad-based job growth. I think the one exception is going to be the energy industry, with the big declines in prices that we’ve seen there. They’re going to be cutting back on their staff. So, it’s a bad time to be graduating with a degree in petroleum engineering, for example.

MATHISEN: What about pay?

FAUCHER: Pay is slowly getting better. We are seeing businesses raise their pay, but still, the labor market, they are still a little bit of slack out there. I think we will see stronger salary growth in 2016. So, this year will be OK. I think the next couple of years will be better.

HERERA: Does it matter where you go to college in terms or university? A lot of people think you have to get an Ivy League education in order to be successful or get that new first job that perhaps has better pay than others. Does that hold true or not?

FAUCHER: I think as the labor market tightens, that’s going to be less of an issue. I think businesses need to look beyond the main school. There is going to be more competition for workers. So, that gives workers graduates who come from schools that may not be as well known a leg up. So, I think with the overall strengthening in the labor market, it’s benefitting college students across the board.

MATHISEN: You know, we just heard from Mary Thompson, who ended her segment with the idea, you’ve got to raise your skill set in this new economy. Talk to us about that, Gus. You know, when I got out of college I had basically a liberal arts degree, graduated in government and foreign affairs.

Would I be dumb to do that, or do I need an engineering degree, or some kind of degree that puts me on a professional track?

FAUCHER: Well, certainly, I think students who are graduating in STEM fields do have a leg up. I mean, we do see that businesses are interested in hiring those types of students who have technical skills.

That being said I think with the better overall labor market, it will be better news for students graduating with degree in liberal arts, but it’s going to be a little more difficult for them to find that first job.

HERERA: And how much of this is dependent on the economy continuing to improve, Gus?

FAUCHER: Oh, I mean, all of it is depending on the economy continuing to improve. You know, we do expect to see solid economic growth over the next few years. That’s leading businesses to hire more workers, more college graduates.

So, I think the underlying economic fundamentals continue to look pretty good. So, I think we will see continued good labor market for college graduates.

MATHISEN: Gus Faucher with PNC Financial Services Group — Gus, thank you very much.

FAUCHER: Thank you.

HERERA: Still ahead, peculiar market patterns. Why the bulls may take back control of the market after tax day.

(MUSIC)

MATHISEN: A peculiar thing happens in the stock market. Almost every year, right before tax day, April 15th, and right after.

Bob Pisani tracking this trend and he explains why the bulls may have something to get excited about.

(BEGIN VIDEOTAPE)

BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: Tax deadline is coming. That’s the bad news. The good news is stocks tend to rise but only after the deadline is passed.

Every year, I get the same question in response to the same phenomenon. The market seems to stall in the two weeks leading up to Tax Day, that’s April 15th. And then, it seems to recover.

The usual explanation is that some people withdraw money to pay taxes, and that seems to make sense.

Data provided to us by Kensho seems to bear out this piece of folk mythology. Since 2005 in the ten trading days before April 15th, the S&P 500 is only up 30 percent of the time with a flat average return. But in the 10 trading days after April 15th, the S&P 500 is up 90 percent of the time with an average return of 2 percent.

From up 30 percent of the time before April 15th, to up 90 percent of the time after April 15th, that’s pretty significant.

This works across the board, the Dow is up 100 percent of the time. That’s 10 out of 10 years. The NASDAQ up 90 percent of the time. Certain sectors are big winners, industrials, energy, and utilities were up 100 percent of the time, as well as the 10 trading days after April 15 with gains in excess of 2 percent.

For NIGHTLY BUSINESS REPORT, I’m Bob Pisani at the New York Stock Exchange.

(END VIDEOTAPE)

HERERA: It was a rough start for the year for New York stocks, everything from uncertainty about the Fed, to falling oil prices, to the strong dollar impacted trading.

Our next guest says these issues and others will continue to plague the markets in the second quarter. He’s John Merrill, president and investment strategist at Tanglewood Wealth Management.

John, welcome. Nice to have you here.

JOHN MERRILL, TANGLEWOOD WEALTH MANAGEMENT: Well, thank you, Sue. I’m glad to be here.

HERERA: I guess volatility is also going to stay with us for the second half of the year — something that we started to get used to, but it’s not disappearing.

MERRILL: Yes, it looks like this market is kind of like the Shakespearean much ado about nothing. A lot of daily volatility, a lot of weekly volatility, but in the end, just like in the first quarter, it didn’t go anywhere. That would be sort of my expectation for the second quarter particularly. I think later in the year, we may get some more updraft, we may get more positive earnings once we swallow some of the negativity from energy, because a lot of the other areas sectors of the economy are doing well, and sectors of the market are doing well.

MATHISEN: You’re in Houston, Texas, how do you keep the troubles in the energy sector from sort of infecting your overall view of the economy?

MERRILL: Well, Tyler, you are right. Certainly for the last months, it has been on everybody’s mind here. Most of us live through the mid-‘80s when this place was the see through buildings that were so talked about for years that we lived through. And nobody wants to go through that again.

I think the companies are a lot wiser in their capital deployment. We all read how fracking is so much easier to control in terms of production and new investments. So, I don’t think it’s going to have the material effects this time like it did in the mid-‘80s.

HERERA: You know, in some sectors of the market, people are saying that we are perfectly priced or maybe a little overvalued and there are others that you still think hold opportunity.

Where would you look for that opportunity, John?

MERRILL: Well, you know, I think right now, we are pressing the higher end of normal multiples and earnings are going to be a little bit softer here. I think you want to look for organic growth. You want to look for companies and industries that are organically growing and get their own earnings growth and that aren’t already overpriced. I mean, bio tech has earnings growth but it is very pricey.

But things like technology, big areas in the technology, I would put services which is the part of the — where consumers are spending money, in restaurants, hotels, airlines. I think those areas that are growing organically and can continue to grow.

MATHISEN: You know, I think about this year’s first quarter economically and I think of 2014, which was the year of tough weather in the first quarter.

Do you expect that the first quarter may be the worst quarter economically and will pick up steam from there or what?

MERRILL: I do. I think that you’re absolutely right. Not that this year is going to be a carbon copy of last year. Certainly, the first quarter isn’t going to be as negative as last year. But I don’t think the second and third quarters are going to be as positive either.

I think we’re still in this new normal growth, 2, 2 1/2 percent growth. Some areas we just discussed doing very well, very strong in the economy. Other areas like energy, you know, that aren’t doing so well.

So, it’s funny how these have rotated back and forth. Energy was one of the prime supports of the economy two, three, four years ago. So, in general, you now, we just don’t have enough oomph to get a total lift of the total economy.

HERERA: All right. John, thank you. Good to see you. John Merrill with Tanglewood Wealth Management.

MERRILL: All right. Thank you so much.

MATHISEN: And coming up, meet the two doctors who want to help you avoid surgery, alleviate pain and get back to being your old self.

HERERA: That sounds good.

(MUSIC)

MATHISEN: More than a million Americans, and this probably understates it, are having knee or hip replacement surgery each year. And as our population ages, that number can more than triple over the next 15 years. Now, there is a treatment that might reduce the need for those surgeries. It’s non-invasive and you can do it at home on your own time.

This bright idea belongs to a pair of Israeli doctors. They designed a boot that helps get the body into proper pain free alignment.

(BEGIN VIDEOTAPE)

MATHISEN (voice-over): A boot that helps relieve joint pain? It sounds too good to be true, doesn’t it? It’s called Apos Therapy, working on all phases of the step cycle.

Tom “Satch” Sanders played 13 seasons with the Boston Celtics in the ’60s and ’70s. Now, 76 he is battling sciatica. But he felt relief soon after trying Apos last summer.

TOM “SATCH” SANDERS, BASKETBALL HALL OF FAME 2011 INDUCTEE: The second day, I know that I have a sciatica problem, but it’s nowhere near what it used to be. And it has to be the shoes, no question.

MATHISEN: It is the shoes, according to Doctors Avi Elbaz and Amit Mor. At an Israeli medical school back in the 1990s, they began to wonder why there was so much focus on fixing bones and ligaments and so little on muscles and the nervous system.

DR. AVI ELBAZ, APOS THERAPY CHAIRMAN & CO-FOUNDER: It’s not magic. It’s a tool, psychical tool, with a lot of logic.

DR. AMIT MOR, APOS THERAPY CHIEF MEDICAL OFFICER & CO-FOUNDER: We can train the muscles and nerves. We can adjust the pain, we can improve function, we can improve the way people walk.

MATHISEN: They became doctor-preneurs in 2004. Now, they use computer analysis to calibrate pods in the soles of the boots. The pods ease pressure on the affected joins. They also create a subtle imbalance, setting the brain to work on rebalancing using muscles in the back and leg to correct the gait.

MOR: These small movements already make a very big change in the way the process are going through the painful area in the knee.

MATHISEN: Walking in the boots 30 minutes to an hour a day can help patients, whether they’re looking to avoid surgery or rehabbing afterwards.

ELBAZ: The surprise is because we slow the acceleration of rehabilitation.

MATHISEN: About 50,000 people have tried Apos in Israel, the U.K. and Singapore. In an independent study of 1,300 patients in the U.K., more than 80 percent reported some pain reduction, almost everyone, though, is skeptical at first.

DR. DAVID LEVY, APOS THERAPY GLOBAL CEO: I did not get this immediately. This is something that, you know, the more you dug into this, the more brilliant it got.

MATHISEN: Dr. David Levy became the CEO last fall, and immediately changed the business of Apos. Instead of investing in brick and mortar clinics, they are training physical therapists to offer Apos.

LEVY: The best way to go is what I call asset light approach, which is to find like-minded physical therapists so we won’t be in retail business anymore.

MATHISEN: Medical insurance doesn’t cover Apos in the U.S. yet. And it’s not cheap, $5,000 to $6,000 per patient. Apos collects a portion of that fee from therapist like David Lipetz.

DAVID LIPETZ, THERAPIST: It’s a game changer. Once everybody gets past the skepticism, it’s going to change the way we look at orthopedic conditions and conservative management.

MATHISEN: At first, Elbaz and Mor set out to relieve pain. In doing so, they may have found a measure of relief for what’s ailing health care.

MOR: We need to take treatment out of the facility. There is not enough money, not enough manpower, not enough beds to do procedures to all the people that are suffering.

(END VIDEOTAPE)

MATHISEN: Well, for now, they are screening and training physical therapists in the New York City area and they hope to begin expanding into major markets next year.

HERERA: It is a bright idea.

MATHISEN: Interesting.

HERERA: Thanks for watching this special edition of NIGHTLY BUSINESS REPORT. I’m Sue Herera.

MATHISEN: And I’m Tyler Mathisen. Thanks from me as well. Have a great weekend, everyone, and a happy Easter. We’ll see you here on Monday.

END

Nightly Business Report transcripts and video are available on-line post broadcast at http://nbr.com. The program is transcribed by CQRC Transcriptions, LLC. Updates may be posted at a later date. The views of our guests and commentators are their own and do not necessarily represent the views of Nightly Business Report, or CNBC, Inc. Information presented on Nightly Business Report is not and should not be considered as investment advice. (c) 2015 CNBC, Inc.

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