Transcript: Nightly Business Report — June 5, 2015

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

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Jobs surge. Hiring ramped up last month. So did wages. And while Main Street gets to work, Wall Street wonders what the strong report may mean for the Fed.

SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: The new normal. Don`t look now, but mortgage rates are heading higher. Just as we enter the home stretch as the spring selling season.

MATHISEN: And, in demand. Imagine no college degree and a starting salary of 70 grand a year. Meet the entrepreneurs who are making that a reality.

All that and more tonight on NIGHTLY BUSINESS REPORT for Friday, June 5th.

HERERA: Good evening, everybody, and welcome.

People looking for work got some good news — job growth accelerated sharply in May. The economy created 280,000 jobs last month. That is the largest gain since December. Wages also rose.

And while the unemployment rate ticked up slightly to 5.5 percent, it was good for reason. More people no longer discouraged entered the labor force it. The better-than-expected reports sent bond yields higher to levels not seen since last October. And now attention turns to the Federal Reserve and what an improving job market means for the timing of the Feds first rate hike.

Hampton Pearson has more.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Employers created more jobs in May than any month this year. With nearly every sector of the economy hiring new works. Job growth with the last three months has averaged 207,000 after revisions for March and April. The employment rate went up to 5.5 percent for a good reason, nearly 400,000 new workers entered the job market.

Leading economists say if these trends hold, the Federal Reserve would have the economic ammunition to raise interest rates later this year.

MICHELLE MEYER, B OF A MERRILL LYNCH: It was hard to poke a hole in the jobs report. You had the headline number coming in strong, a lot, you know, much better than expectations, net positive revisions. So, the trend looks good, and that`s what I think is really important for Fed officials.
Professional and business services, health care and surprisingly leisure and hospitality sector led the way in new hires.

PEARSON: City Bikes is a small business success story. Saul Leiken pedals bikes costing from $450 to $3,000, business is booming and he`s hiring 10 new workers.

SAUL LEIKEN, CITY BIKES GENERAL MANAGER: The economy is doing better and better and so are our sales, which means that we actually have some funds lying around to invest in these new programs and these new employees.

PEARSON: After working temp jobs for years, Joe Paisley just got hired three weeks ago.

JOE PAISLEY, CITY BIKES: I mean I had several other prospects, but, yes, I think that City Bikes is the most in line with my philosophy about the practical use of bikes.

PEARSON: Other economists also see improving spending patterns in housing and autos as a sign the consumer may be ready to step up.

DAVID KELLY, JPMORGAN FUNDS: We`ve seen pending home sales numbers since 2006 and pending vehicle sales strongest since 2005. We`ve got unemployment claims that the lowest level in 15 years. So, this is actually quite a healthy economy here, much more healthy than the Fed I think has been talking about.

PEARSON (on camera): The steady hiring could drive the economy for the rest of the year. The hope now is to get the cautious consumer off the side lines.

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

(END VIDEOTAPE)

MATHISEN: Fed official to speak publicly after the jobs report says the central bank is still likely to raise interest rates later this year, but New York Fed president Bill Dudley declined to say exactly when the Fed would act.

(BEGIN VIDEO CLIP)

BILL DUDLEY, FEDERAL RESERVE BANK OF NEW YORK PRESIDENT: I still think it`s likely that conditions will be appropriate to begin monetary policy normalization later this year. But the likelihood and timing will depend on the economic outlook, and that will be largely shaped by the incoming economic data.

(END VIDEO CLIP)

MATHISEN: Dudley, we should point out, is a voting member of the Feds policy committee.

HERERA: Our guest tonight says the headline number on today`s report was great but the details are even better. He`s Anthony Chan, chief economist at Chase.

Welcome, Anthony. Nice to see you.

ANTHONY CHAN, CHASE CHIEF ECONOMIST: Glad to be here.

HERERA: So what impressed you so much about the internal components about this report?

CHAN: What really impressed me is people have been constantly talking about all those discouraged workers, that they somehow make these numbers a lot worse. But the reality is that the discouraged workers are going down and they were down 50 percent during the peak of the financial crisis, and you saw a 200,000 decline in discouraged workers. The other thing that really impressed me is the number of people that are rejoining the labor force.

Once again, you can`t say people are dropping out of the labor force and we are in fact entering a huge number of people in the labor force.
And that means when the unemployment rate goes up under these circumstances where you are creating a lot of jobs and huge surge of people coming in, it`s great news.

MATHISEN: I think there was an uptick in labor participation for three months in a row. But one area that is of concern it seems to me is youth unemployment and minority unemployment, which are fiscally high and youth minority rose this month. How do we solve that?

CHAN: You`re never going to have everything hitting on all cylinders, but one thing so solve that is to create more educational opportunities.
When you consistently see the college, educated unemployment rate below 3 percent for so long and that number is coming down during the economic expansion, that`s impressive and that tells you that that is the ticket to growth.

If you look at — since the beginning of this economic expansion that began in June of 2009, more than 70 percent of the jobs that have been created have gone to people that have college education or higher education, and I think that`s pretty impressive to know that if you are trying to solve though problem, creating more educational opportunities for those individuals, I myself come from a humble background and I`m the first person to graduate from high school, college, graduate school. And I think that education has in fact served me well and I think it will serve a lot of people that have similar backgrounds that I have encountered.

HERERA: And, Anthony, I know your advice will serve viewers well as too.

All right. Thanks for joining us. Anthony Chan with Chase.

CHAN: My pleasure.

MATHISEN: Well, stocks spent much of the day moving between gains and losses. By the close, the Dow Jones Industrial Average fell 56 to 17,849.
The NASDAQ up nine by contrast. The S&P 500 sort of split the difference.
It was down 3. And for the week, all three major indexes were lower.

HERERA: As we mentioned, the higher than expected May job numbers send bond yields soaring, the ten-year in particular. And that`s the one that mortgage rates follow.

Diana Olick explains what that means to the tail end of the spring housing market.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):
Phones were ringing off the hook at the PMAC lending office in Boca Raton, Florida, after a selloff in the bond market sent mortgage rates higher.

MATT WEAVER, PMAC LENDING SERVICES: There is a panic in the air. The question just becomes, is the train going to stop? Where are rates going to end?

UNIDENTIFIED MALE: We`re going to look at rate at 4.75.

OLICK: Four percent and above is the new normal on the popular 30- year fixed loan and borrowers are not taking it lightly.

WEAVER: People are reacting quickly. While we know 4.25 is still historically amazing interest rate, but over all once, you`ve been used to being below 4 percent, for quite sometime, it takes a little bit of getting used to in this shorter period of time.

OLICK: Just look at where rates have been over the past two months, down near 3.6 percent, now up at 4.25 percent. The last time we saw a climb this steep was after the so-called paper tantrum, right around this time two years ago. The Fed hinted it would stop buying mortgage back securities and bond yields shot up.

So, what does that mean for the home buyers and the sellers? For the home buyers, the difference on a monthly payment for a $200,000 loan from the lows of this year to today is about $72. That might not sound like a lot.

JOHN CANNALLY, LPL FINANCIAL: For now, rising rates means good news for housing, it will push people who are on the side lines back into the game. But you probably have a ways to go before higher mortgage rates have people not buy homes.

OLICK: But it could cause a problem for borrowers qualifying for the loan.

WEAVER: That may result into not qualifying or qualifying for $10,000 less in purchasing power.

OLICK: Sellers have been in the driver`s seat mostly with demand for precious few listings driving prices higher, but as interest rates rise, sellers may have to reconsider their asking prices, if they want to get qualified buyers.

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

(END VIDEOTAPE)

MATHISEN: OPEC said it will maintain its current oil production levels for at least the next six months. That level now stands at 30 million barrels a day, and that could keep a lid on oil prices for a while.

Steve Sedgwick has been following the action at OPEC from Vienna.

(BEGIN VIDEOTAPE)

STEVE SEDGWICK, NIGHTLY BUSINESS REPORT CORRESPONDENT: World oil markets coming off recent highs on the back of the OPEC decision to keep output unchanged at 30 million barrels a day in Vienna, not a surprise given the fact they are producing at 31 million barrels a day but it was a very short meeting, a meeting in which the players looked happy despite the fact, of course, that oil prices are still lower than where they were back in November when they originally decided to keep output unchanged and that sent the markets down aggressively.

What they are saying is that all members can pretty much produce as much as they like and they are seeing move demand on the back of lower prices from Asia and from Europe as well. One interesting outlier going forward, though, is that Iran could come back to the export market in some fashion if they get to the nuclear deal. I spoke to the Iranian oil minister who said, actually, he could put one million barrels of extra oil for exports as well, and that, of course, could dent the world oil prices and put way more supply than is demanded on to these markets.

So, at the moment, the OPEC ministers seem happy but many of them saying the better price for them and the consumer at the fair price is $75 to $80 a barrel. That is round about $15 higher than where WTI is currently trading.

This is Steve Sedgwick for NIGHTLY BUSINESS REPORT in Vienna.

(END VIDEOTAPE)

MATHISEN: Still ahead, the skill that`s needed most in this labor market. Mary Thompson tells us what that is and where the jobs are.

(MUSIC)

HERERA: With the economy continuing to add jobs at a strong pace, one sector of the market is bracing for a shortage of almost 200,000 workers by 2018. Mary Thompson has more on the big job opportunities in big data from LinkedIn`s headquarters in Mountain View, California.

(BEGIN VIDEOTAPE)

MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): A painter since childhood, 29-year-old Maria Walton says her art makes her good at her job.

MARIAH WALTON, LINKEDIN DATA SCIENTIST: I have an image of everything in my brain and I feel like that has been a really good strength in joining disparate data sets together.

THOMPSON: Always an artist, once a meteorologist, Walton is now a data scientist at the networking site LinkedIn (NYSE:LNKD). Her job is so sift through the billions of data filed generated by clicks on the LinkedIn`s Web site. That`s information from this big data is seen helping the firm serve its clients and advertisers better.

But it`s not just tech firms like LinkedIn (NYSE:LNKD) mining big data. All industries do it these days, putting a premium on workers like Walton.

SHERRY SHAH, LINKEDIN HEAD OF DATA RECRUITING: Job market is very hard data. Data fielders is actually very sexy and it`s in demand. So, it`s super hard to find right talent and the right people.

THOMPSON: That demand leading the consulting firm McKenzie to forecast a coming shortage of big data analysts.

MICHAEL CHUI, MCKINSEY GLOBAL INSTITUTE: In 2018, we sized a potential gap of 140,000 to 190,000 positions in United States alone.

THOMPSON: LinkedIn`s head of data recruiting Sherry Shah will hire over 100 data scientists this year, a 50 percent increase from 2014. She says competition for talent often leads to bidding wars for workers who, depending on their background, can command a six-figure salary.

(on camera): So, LinkedIn (NYSE:LNKD) keeps its mind and eyes open when looking for talent, searching its own Web sites, recruiting at tech talks and conferences, and taking a chance on people like Walton who don`t have a background in computer science.

People like Jerrod Lowmaster. The 31-year-old working in intelligence and the solar industry before landing at LinkedIn (NYSE:LNKD).

JERROD LOWMASTER, LINKEDIN DATA SCIENTIST: The one common thread I think that really unifies those is I was in a place that had a great deal of data. And it really wasn`t structured. And there were these interesting and really critical important business questions that we wanted to ask of the data.

THOMPSON: Questions big data miners like Lowmaster and Walton see helping their employer answer the big questions that face business today.

From Mountain View, California, I`m Mary Thompson, for NIGHTLY BUSINESS REPORT.

(END VIDEOTAPE)

MATHISEN: Gap`s sales keep sliding, and that is where we begin tonight`s “Market Focus”.

The retailer saw same-store sales fall in May, but not as much as analysts expected. Sales at the company`s Old Navy brand were much higher and that helped to offset a decline at Gap (NYSE:GPS) and Banana Republic.
Still, shares fell about 1 percent. They finished at $38.22.

Strong results by contrast from Diamond Foods (NASDAQ:DMND), the company easily beating profit expectations today. It also hiked its full- year earnings guidance. Revenue did miss forecasts, but investors overlooked that. Shares were more than 7 percent higher to $31.11.

HERERA: David`s Tea saw its shares surge on its first day of trading.
The Canadian beverage giant will use the proceeds from today`s IPO as it looks to expand into North America. Shares were priced at $19 a piece.
But the stock surged well above that, closing at $27 an increase, a gain of
42 percent.

And late in the day, shares of Diageo got a lift on reports of buyout interest. A Brazilian billionaire is considering taking over the liquor giant that owns Guinness, and that`s according to Bloomberg. Shares popped right when the news came out, ending the day 8 percent higher at $118 even.

MATHISEN: Let`s gets right to our weekly market monitor. Last time he was on in March, he recommended Apple (NASDAQ:AAPL). It`s up 1.5 percent. McDonald`s, though, off 1 percent. And his third pick, Citigroup (NYSE:C), up 6 percent.

He`s Mark Luschini, chief investment strategist at Janney Montgomery.

Mark, welcome back. Good to have you here.

Let me — before we get to a pick that is still on your list, let me ask you about McDonald`s (NYSE:MCD), are you still comfortable holding it?

MARK LUSCHINI, JANNEY MONTGOMERY: We are, Tyler. We bought it for
39.5 percent dividend yield it offered at purchase price and the fact that the new CEO still has plenty of runway to be able to turn around the iconic franchise that we know has great brand value but needs a couple of fixes.
So, as a consequence, we`re still long.

MATHISEN: And you like Citi the last time, you must love it now, it`s up, you are sticking with it.

LUSCHINI: Absolutely. The money center banks are cheap from evaluation perspective, but yet haven`t been fully monetized even as earnings growth is started to track fairly robustly within the space in the aggregate. Citigroup (NYSE:C) particularly is the cheapest among those universal banks. We like its long-term prospect.

HERERA: You also like Gilead. Why?

LUSCHINI: Well, the health care space is one that`s done very well over the last several years, and it has a demographic tail wind, of course.
Gilead is a biotech company, trading at 10 times forward earnings versus at an industry that`s trading about 50 multiple, and S&P 500 more than 40 percent higher than that. So, it`s cheap on evaluation basis, good growth prospects, and its hepatitis C treatment is considered to be the best in the industry.

MATHISEN: Let`s turn to your third pick, which is an ATF, IShares Home Construction, the ticker ITB.

I`m curious you like this on a day when interest rate are moving up and we have mortgage rates moving up. That`s usually not great for homes and home builders.

LUSCHINI: Well, Tyler, like a previous guest had alluded to, it may actually entice some buyers on the side line to miss the opportunity. But that said, it`s the first time in actually quite a few years we`re starting to actually see household formation grow at a pace faster than housing starts. And so, to the extent that may draw demand into the home builders market, we think it is under supplied, and therefore, ought to be good for home builders prospects to continue to put new homes out into the market place to be bought.

HERERA: Obviously, you like the three stocks you gave us but over all when market, a lot of people think that valuations are a bit stretch.
Would you agree with that or not?

LUSCHINI: That`s not unfair, Sue. We think valuations are full and that`s why, if you`re going to be long in the equity market at the moment, I think you need to try to find spots where there`s great value, or at least you have some valuation support and those sectors that are mentioned, consumer discretionary subsets of it, financials, and, of course, health care, we think represent that.

MATHISEN: Mark, thank you very much. Have a great weekend, sir.

LUSCHINI: Thanks, Tyler. You too.

MATHISEN: Mark Luschini with Janney Montgomery.

HERERA: Coming up, forget a four-year computer science degree. Meet the entrepreneurs who can teach you to program in just four months. It`s our latest bright idea.

(MUSIC)

MATHISEN: Here is what to watch next week: Apple`s worldwide developer conference kicks off Monday, so we`ll see what new i-products the company has in store.

McDonald`s (NYSE:MCD) will announce monthly sales for the last time.
The chain has decided to stop reporting the figure as part of a new turn- around strategy, lower the month to month pressure there.

A few important data reports out next week, including retail sales, that`s a biggie on Thursday. That`s what to watch next week.

HERERA: Chasing the Triple Crown. At the Belmont Stakes tomorrow, American Pharoah will try to do what only 11 horses before him have done.

Robert Frank talked to the thoroughbred`s owners ahead of the big race.

(BEGIN VIDEOTAPE)

AHMED ZAYAT, AMERICAN PHAROAH OWNER: Honestly, it has been surreal.
It`s very hard to put it in content thoughts. I mean, we won the Kentucky Derby, the Preakness, and now and in our own state, coming back, trying to do something that has not been done in 37 years with a horse that we bred, we have the whole family, we are elated. It`s a big dream. You don`t want to wake up.

But it is — but as a fan, I just really want to see that happen in my lifetime. And it could happen and it just — just being part of it makes it very sweet.

ROBERT FRANK, NIGHTLY BUSINESS REPORT CORRESPONDENT: We`ve been here so many times with horses winning the first two legs and then just not — this mile and a half separates so many horses from history. What makes you confident specifically about his condition and how he`s running right now that you think you can win this?

JUSTIN ZAYAT, AMERICAN PHAROAH OWNER: Just the way the horse looks right now, he`s giving us the confidence that is making us want to be here and feel this way — the way he is doing things, the way he looks, his demeanor. He`s right on cue.

(END VIDEOTAPE)

HERERA: Good luck to him. If American Pharoah wins the Belmont Stakes, he will be the first Triple Crown winner since 1978.

MATHISEN: An education, Sue, and a Triple Crown for graduates might be a degree with little or no debt and a solid job, right?

Well, sometimes, it feels like putting those three together is almost as rare as a horse racing Triple Crown and that is why the subject of our next story won an ivy leaguer who made it through Harvard Business School and the other a college dropout got the bright idea to do something about creating an affordable education that really pays off.

(BEGIN VIDEOTAPE)

MATHISEN (voice-over): Jen Eisenberg is a software engineer at Paperless Post. That`s the online stationery stop. She helps write the instructions or the code that make the web site function. A computer science major? Not Jen. That foray lasted one semester.

JEN EISENBERG, PAPERLESS POST: I realize I couldn`t build anything tangible. It starts with theory and algorithm.

MATHISEN: Instead, Eisenberg majored in linguistics, but spent the summer before her senior year of college learning the basics of coding at the New York City`s Flatiron School.

ADAM ENBAR, FLATIRON SCHOOL CO-FOUNDER AND CEO: We`re actually graduating fewer computer science majors from college today than we were 20 years ago. That`s crazy. The Internet happened.

MATHISEN: Adam Enbar helped start the Flatiron School and he didn`t study computer science either. After college, he wondered if his education was worth the hundreds of thousands of dollars he and his family spent.

ENBAR: I didn`t feel like I had any real skills. The college degree used to be the best investment somebody could make and that`s not really the case anymore.

MATHISEN: He began working at a venture capital firm, looking for ways to invest in fixes for higher education. He didn`t find much until he heard about Avi Flombaum, a college dropout who was teaching people code and helping them get jobs.

AVI FLOMBAUM, FLATIRON SCHOOL CO-FOUNDER AND DEAN: Code is just giving instruction. Computers are stupid. They don`t know anything. We just teach them everything.

MATHISEN: Flombaum taught himself to code as a New York City teen- ager. He dropped out of college to write software for a hedge fund.
Later, he cofounded his own web based business. But on the side, he began teaching others to code at meet-ups, workshops and coffee shops. Students thanked him for changing their lives.

FLOMBAUM: I was like, wow, this teaching thing was really amazing, like that was a profound amount of impact to have on someone.

MATHISEN: So, Enbar sent a tweet, and they met up for coffee.

ENBAR: He`s telling me about his hobby, all the while my mind is melding. Like you are doing what most in education in America can`t do.

MATHISEN: Enbar figured they should start their own school.

FLOMBAUM: And I was like, no one is going to come to our school.

MATHISEN: Within days, though, Flombaum changed their mind. They leased space, bought desks, and for $40,000 total, opened the Flatiron School in October of 2012.

FLOMBAUM: Having vocabulary and give very clear instruction is a science in itself.

MATHISEN: Only 6 percent of the applicants are accepted into Flatiron`s four-month program. It costs $15,000. But 99 percent of the graduates, nearly 500 in less than three years, have jobs. Average pay, more than $70,000 a year.

TIFFANY PEON, CONSTANT CONTACT: My increase in salary was something like 40 percent.

MATHISEN: Tiffany (NYSE:TIF) studied music business management in college and now, she`s a software engineer at an online marketing firm.

PEON: I was a musician, a theater kid, it really doesn`t matter what kind the background, as long you want to learn it.

MATHISEN: Which is why Enbar and Flombaum see a future where coding like reading, writing, arithmetic is a basic tool that can open the door to success.

FLOMBAUM: You just need to create a new way to teach people this stuff, in a new kind of paradigm that doesn`t require four years and a master`s degree in linear algebra in order to take your first computer class.

(END VIDEOTAPE)

MATHISEN: Students range in age from about 17 to 50, and Flatiron is offering classes with live teachers not online for high schoolers in 13 cities across the country this summer. The founders believe most jobs will eventually entail some level of coding and that`s why it`s not just for computer science geeks.

HERERA: I think that`s fantastic.

MATHISEN: Way to go.

HERERA: My daughters would love that.

MATHISEN: That`s it for NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera. And we want to remind you that this is the time of year that your public television station seeks your support.

MATHISEN: I`m Tyler Mathisen. Thank you for your support. Have a great evening — evening, everyone. We`ll see you`re here on an evening.
We`ll see you 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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