Transcript: Nightly Business Report – October 1, 2015

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

Consumers are heading into showrooms and buying up new cars at a blistering

layoff announcements rising sharply in September, has the job market

HERERA: And California dreaming. Is the largest state economy hit
hardest by the recession roaring back to life?

All that and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
October 1st.

MATHISEN: Good evening, everyone. And welcome.

A blockbuster month for auto sales, best annualized pace in a decade.
It`s one area of the economy that is going gangbusters while other sectors
continue to just chug along. September auto sales rose to a seasonally
adjusted annual rate of 18.2 million units. This according to auto data
and that smashed expectations.

Ford sales up 23 percent. Fiat Chrysler saw a 13 1/2 percent rise.
And GM posted a 12 1/2 percent jump.

Phil LeBeau tells us why sales are so strong at the big three.


“Sizzling September” in the showroom. U.S. auto sales roared to their
strongest monthly sales pace since July of 2005. Most of the major
automakers posted double-digit gains, with some like General Motors
(NYSE:GM) doing far better than expected.

What drove those strong numbers? Labor Day, which is traditionally
one of the busiest weekends of the year for auto dealers, gave September
sales an early pop. Meanwhile, trucks and SUVs remain red hot thanks to
low gas prices. And the combination of strong consumer confidence and low
interest rates is convincing millions this is the time to buy a new

Even Volkswagen, which has been rocked by the diesel emissions
scandal, pulled out a slight gain in sales last month. Impressive, since
massive negative publicity and an order not to sell clean diesel models
left many VW dealers struggling to bring in customers. Now, heading into
the fourth quarter, the auto industry is on pace to have its best year
since 2000.

And after a huge September, some are even talking about 2015 sales
climbing to an all-time high of greater than 17.4 million vehicles.



HERERA: General Motors (NYSE:GM) plans to cut $5.5 billion in costs
during the next three years. During an annual investor presentation, CEO
Mary Barra said the company seems double-digit earnings growth in 2016.
The nation`s biggest automaker will increase its return to investors with
stronger profit margins and share buybacks.

MATHISEN: Members of the united auto workers have now rejected a
four-year contract that its leadership had negotiated with Fiat Chrysler.
The tentative agreement was voted down by 65 percent of the 40,000
unionized workers at the Fiat Chrysler plant. Now, this development could
set the stage for some localized strikes against the automaker.

HERERA: And from the auto sector to the labor market recovery, which
so far has been solid. Even with today`s slight increase in first-time
claims for unemployment benefits, the overall number of weekly applications
remains below 300,000, the 30th straight week below that level.

But on the day before the release of the government employment report
there`s news of possible job cuts at Walmart headquarters, the nation`s
largest private employer. Conagra also says it plans to cut 1,500
positions. And AMD will cut 5 percent of its global workforce. This
follows similar announcements from Hewlett-Packard (NYSE:HPQ), Caterpillar
(NYSE:CAT), Chesapeake, Bank of America (NYSE:BAC), and others.

In fact, a new report by Challenger, Gray & Christmas, which is a
firm that tracks the job market, says the number of announced layoffs last
month topped 58,000, up more than 40 percent from the prior month.

So, is the labor market at a turning point?

Hampton Pearson takes a look.


September jobs report tomorrow, cost currents from the economy. Headline
weekly jobless claims up by 10,000 last week, topping 277,000, but the more
closely watched four-week moving average dropped to just over 270,000, a
15-year low. But a surge in announced layoffs last month in energy and
high tech is raising concerns the job expansion may be nearing an end.
U.S. firms announcing plans for nearly 60,000 layoffs, mostly in the
computer sector, with Hewlett-Packard (NYSE:HPQ) accounting for nearly half
the job cuts, according to a closely watched private sector survey.

you start to see as you get near the end of a period of expansion but
before it really turns, as you start to see major layoffs occurring, big
mega layoffs like we`re seeing now. So, the layoffs aren`t that heavy, but
they are on pace to be the heaviest since 2009.

PEARSON: Earlier this week, a closely watched private sector survey
says employers added 200,000 workers to payrolls last month, matching the
consensus forecast for overall job growth. The author of that survey
predicts a full employment economy by this time next year.

MARK ZANDI, MOODY`S ANALYTICS: Here`s a prediction for you. A year
and a half from now Election Day, we`re going to have — the problem isn`t
going to be unemployment. It`s going to be a significant lack of labor.

PEARSON: New data out today shows a slowdown in manufacturing, tied
to a strong dollar and slowing global economy making U.S. exports less

But with home building leading the way, construction spending here in
the U.S. reached a seven-year high in august, topping a trillion dollars.

MICHELLE MEYER, BANK OF AMERICA: The domestic economy has been
improving. The labor market has been improving. We`ve been creating jobs.
We`ve been seeing a drop in the unemployment rate. Consumer confidence is

The challenge that we face is that there`s weakness abroad and we`re
importing that weakness.

PEARSON: The September jobs report will be a key benchmark for the
Federal Reserve when it meets to take still another look at interest rate
policy at the end of the month.

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


MATHISEN: Mark Zandi, whom you just heard from in that report, joins
us to continue the discussion on the labor market. He`s chief economist at
Moody`s (NYSE:MCO) Analytics. And last month he basically nailed the
government`s jobs report number.

ZANDI: I did.

MATHISEN: Mark, way to go, buddy.

Let`s talk a little bit about the thesis of Hampton`s report, that
the labor market may be peaking based on some of the numbers we`ve seen
just in the past few days. Do you buy that thesis or not?

ZANDI: No, Tyler, I do not. I think the labor market is very
strong. I think the economy`s creating roughly 200,000 jobs per month.
It`s been doing that very consistently over the last two, almost three
years now.

I see no sign of slowing. Not at all. Just to give you a statistic,
the number of job openings rose to 5.7 million in the number of July. That
was up a million from a year ago, and 2 million from two years ago.

And as you turn to the labor, that`s the highest on record. That`s a
pretty good leading indicator. I don`t see any weakening at all in the
labor market, not in the near future.

HERERA: Well, then what do these layoffs bit likes of Hewlett-
Packard (NYSE:HPQ), Whole Foods the other day, Caterpillar (NYSE:CAT),
Chesapeake — what do they tell you if not something about the labor market
about the overall economy? Because it`s a broad swath of industries.

ZANDI: Yes. You know, Sue, they`re just anecdotes. I mean, you
mentioned the unemployment insurance claims. That`s the real number.
That`s the people who have lost their jobs. They go down to their
unemployment insurance office and say hey, look, I`m unemployed, can you
help me out, and you get a check. That is a true measure of layoffs in our
economy, and they are very, very low.

Anything under 300,000 per week is about as good as it gets and
suggests that layoffs remain very, very — yes, sure, there are some
companies that they`ve got their own idiosyncratic problems or
restructuring. The energy sector of course is grappling with the collapse
in oil prices. So, it`s weak there. Some manufacturers are having some
trouble with the strong dollar and weak global economy. So, they`re
changing things around.

But, you know, if you look at the economy broadly, it`s very strong,
lots of jobs. Layoffs are very low. I wouldn`t read too much into it.

MATHISEN: So, more idiosyncratic than systemic.

Let`s turn then to the September jobs report. What are you looking
for there, in terms of overall numbers, pockets of strength, pockets of
weakness, and how the Fed will interpret it?

ZANDI: You know, another 200,000 job month. That was consistent
with the ADP number, the number we put together each month based on the
payroll records of lots of companies. So, I think that`s a pretty good
number for tomorrow.

When you actually see the unemployment rate dip again, it was at 5.1.
I wouldn`t be surprised if we hit 5.0. And that`s a pretty important
threshold. That means the economy is closing in on full employment pretty

Now, there are two key soft spots in the economy.

One, as I mentioned, energy. The energy industry is really
struggling with $50 oil. And since people are changing their expectations
about future oil prices, they`re marking them down. We`re seeing more
layoffs. And I suspect that will continue into next year.

The other is manufacturing that`s related to exports. Very, very

Fortunately, that`s being offset by the other good news we got today,
which you referred to. That`s the boom in vehicle sales, which is lifting
vehicle manufacturing. But the export side of manufacturing is weak.
Those are the two key weak sectors. Everything else is — every other
sector of the economy is adding to payrolls in a very strong way.

MATHISEN: And on that upbeat note we leave it. Mark Zandi, thanks
very much. Mark is with Moody`s (NYSE:MCO) Analytics.

HERERA: And as the economy continues to strengthen there is one
industry that can`t fill jobs fast enough. Morgan Brennan explains why the
transportation sector is experiencing a shortage of much-needed workers.


transportation and logistics sector is facing an unprecedented labor
shortage, and just as companies ramp up hiring for the holidays. That`s
according to a new study by Cap Gemini Consulting, Korn Ferry, Penske and
Penn State.

Experts say one of the biggest pain points is in warehousing, an
industry featuring the labor crunch across the board, but particularly in
recruiting temporary workers.

work that needs to be done is going up and that`s really made worse by the
fact that there`s a shortage of labor. It might be the unemployment rate
that has changed as that`s gone down, either unemployment or participation
rate. It could be some wage stagnation where people are willing to leave
jobs for other lines of work that have increased wages.

BRENNAN: Layo has visited two-day dozen warehouses in the last four
months. He says forklift drivers, supervisors with management skills and
temporary workers that can pick and assemble packages are in in short

It`s motivating companies to hike pay. Industry recruiting firm Poll
Logistics says starting warehouse wages which have been stagnant for years
have in some markets increased by $1.50 to $3 an hour. Companies are also
making schedules more flexible to better compete with Uber and other share
economy start-ups that target the same workforce. It`s all expected to
translate into higher operating costs.

LAYO: This year, businesses are going to be stuck holding the costs
because a lot of the promotions have already been set. Going into next
year, if there`s major rebudgeting done, I think a lot of that is going to
have to be passed on to consumers.

BRENNAN: UPS plans to hire 95,000 workers for peak holiday season.
While FedEx (NYSE:FDX) is recruiting more than 55,000. Both delivery
companies say it`s too soon to tell whether this could be a headwind for
their busiest quarter. But they like the rest of the industry are watching
the situation carefully.

And, of course, it all adds to a massive shortage already plaguing
the overall sector: truck drivers. The American Trucking Association`s
estimate as many as 40,000 drivers are needed immediately just to handle
current demand.

That issue has helped fuel a series of multibillion-dollar deals,
including UPS`s recent acquisition of Coyote Logistics. and XPO Logistics
pending purchase of Con-way.



MATHISEN: Well, the Federal Reserve, of course, is paying close
attention to the labor market, and according to one official, an October
interest hike is still possible.

The president of the Richmond Fed, Jeffrey Lacquer, told “The Wall
Street Journal” that the Central Bank will have more information by its
next meeting, end of this month, and that policy makers may be convinced
that the economy is strong enough to absorb a hike in rates.

HERERA: Meantime, construction spending climbed in August to its
highest level since 2008, up 0.7 percent to more than $1 trillion. And
that is the ninth consecutive monthly increase, according to the Commerce
Department. But one investment firm sees construction spending advancing
at a slower pace than last quarter, and that prompted Barclays to lower its
third quarter GDP tracking forecast to 1.5 percent, down from more than 2
percent last week.

MATHISEN: It was a modest start to the fourth quarter for the
markets, one day ahead of the jobs report stocks were mixed. But they
ended well off their lows, and you can say that again.

The Dow Jones Industrial Average lost 12 points to 16,272. It had
been down as much as 211. The NASDAQ rose nearly seven points. And the
S&P 500 gained three.

So, after a lousy third quarter, is this the month when stocks find a
bottom? Bob Pisani lists the five things that are needed to stabilize the


many times. October is traditionally the month where stocks bottom.

There`s some truth to this. Since World War II, more than a dozen
bear markets have ended in October. Now, that`s the good news.

The bad news is these are not normal times. So just because we`re
going into a seasonally strong time of the year, it doesn`t automatically
mean we`re going to rally.

What do we need for a bottom? There`s four or five key elements.

First, we need stability in China. We don`t even need more stimulus.
We just need a more stable economy over there.

Secondly, oil has to stabilize. Oil`s become a proxy for global
growth. So, stocks and oil often trade in tandem.

Third, we need clarity from the Fed on interest rates. It`s time to
make a choice — rate hike or no rate hike. Of course, we need a stable

And finally, continued job growth. And more importantly, wage

Now, this is a pretty broad wish list. But we don`t necessarily need
all of these things to happen for stocks to end the year higher. But we
need a few of them.

So, right now, we`re seeing job growth and there`s modest stability
in the dollar in oil. But both of them still have a tentative feel to

Bottom line, we still don`t have enough conditions to say that August
24th bottom was the real bottom.

For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock


MATHISEN: Still ahead, what Republican presidential front-runner
Donald Trump told our John Harwood about his plan for taxes and to grow the


MATHISEN: Now to the race for the White House. Taxes will likely be
a big issue for American voters. Almost always are.

John Harwood recently interviewed Republican presidential candidate
Jeb Bush about his plans for the economy. Now, he talks to Republican
front-runner Donald Trump about his proposal to overhaul the tax system.


JOHN HARWOOD, CNBC: Jeb told me the other day that Trump`s strategy
is to say things over and over loudly.

JEB BUSH (R), PRESIDENTIAL CANDIDATE: You`re loud and you repeat
something over and over again.


BUSH: You think that that turns it into truth.

HARWOOD: What do you say about that?

statement. I think he`s a very nice person. He`s doing very poorly. He
maybe will do better. He`s going to spend a lot of money.

HARWOOD: Did you see what Jeb said about your tax plan?

TRUMP: I did not.

HARWOOD: He said, I`m very flattered, it looks like mine. He
suggested you copied his and just lowered the rates a little bit. He said,
but he should have tried a little fiscal responsibility.

TRUMP: Yes, I didn`t do that at all. Certainly the last person I`d
want to copy is Jeb. I think that our economy will grow of much faster
with my plan.

HARWOOD: You talked about cutting expensive hammers and things in
the budget. But if you don`t touch Medicare, Medicaid, Social Security,
and increase the military, there aren`t enough expensive hammers to cut.

TRUMP: So, a big part of my plan is to take all of these different
government agencies who — which are totally out of control and to cut
costs, coupled with a very large tax decrease. And by the way, it`s not
for the rich, although the rich will benefit especially if the economy
takes off. They might be better off, including me.

HARWOOD: Huge benefits to the rich in your plan.

TRUMP: Benefits. We`re getting rid of carried interest. We`re
getting rid of certain things that make it too easy for people. If my plan

HARWOOD: You`re cutting the top rate almost 40 percent.

TRUMP: If my plan takes off, right, even though we`re getting rid of
carried interest because it`s always been unfair, you know it and everybody

HARWOOD: But it`s tiny. Carried interest is tiny.

TRUMP: But it`s psychologically very important.

So what happens is this. My plan is best for the middle income, for
the middle class, which has been decimated in this country. You know, they
really built this country. They have been lost with our politicians for
the last 25 years.

And I think my biggest impact is to the middle-income people. I
think we`re going to give them great incentive and I think it`s going to be
a great plan.


MATHISEN: Watch more of John`s interview with Mr. Trump. Go to our
Web site,

HERERA: The EPA unveiled new rules on smog-causing emissions. But
the tighter regulations fall short of what public health advocates and
environmentalists had urged. The new standard tightens the current
standard on emissions on things like smoke stacks and tail pipes that have
been linked to asthma and respiratory illness. Business groups say the new
rules will increase costs and could jeopardize jobs.

MATHISEN: Dunkin` Brands had its worst day ever and that, folks, is
where we begin tonight`s “Market Focus”.

This as the Dunkin` Donuts parent provided a disappointing sales
growth outlook and said it will close 100 of its stores. The company
citing volatile commodity prices and a spike in egg prices. The stock slid
more than 12 percent to $43 a share.

Nordstrom (NYSE:JWN) announces a dividend and buyback news. The
chain will pay a special cash dividend of $4.85 a share on October 27th and
add $1 billion to its repurchase plan. Shares at Nordstrom (NYSE:JWN)
initially rose after the close. During the regular session the stock was
off a fraction to $71.43.

Shares of the biotech company Illumina (NASDAQ:ILMN) slipped in
today`s session. The company`s competitor PacBio came out with a faster,
cheaper version of one of its systems. The firm was also downgraded at
Leerink Swann because of uncertainty for its future products. Shares
there, a downgrade, fell 10.5 percent to $157.21.

HERERA: Performance Food Group made its market debut in today`s
session. The firm, which says it is the third largest food distributor by
revenue in the country, offered 14.5 million shares at $19 a piece. The
company CEO explains what`s been driving business forward.


better. Employment`s getting better. What`s particularly good for us is
the two-income family. That`s when eating out kind of goes from being
discretionary to being a necessity. So we have a great outlook right now.


HERERA: Shares rose one percent to $19.20.

Experian announced that one of its business unit has been hacked,
which could impact T-Mobile. The breach occurred on a server that
contained data on behalf of T-Mobile, since it`s one of Experian`s clients.
The data stolen includes the personal information for about 15 million
people. Shares of T-Mobile fell in initial after-hours trading. During
the regular session, the stock was up a fraction to $40.13.

The spice maker McCormick (NYSE:MKC) posting mixed results with
earnings coming in below consensus. The company`s results were hurt by
currency impacts. It expects annual earnings to be at the low-end of
estimates. The stock was off more than 4 percent to $78.68.

MATHISEN: California, the largest state economy in the United States
by far, eighth largest in the world if it stood alone as a nation. And
there are some new reports out on the health of this state`s finances.

Jane Wells has our report tonight from Los Angeles.


once again opened her Golden Gates. The state hit hardest by the recession
has roared back.

But as tech is booming, the stock markets have been busting and a
slew of economic forecasts suggests the California economy may not quite go
Hollywood the next few years.

Here are two things to watch: First, tax revenues in the nation`s
largest economy could take a hit because California still depends heavily
on the capital gains taxes of its wealthiest residents.

other asset prices are critically important.

WELLS: A full 10 percent of California`s income tax revenues are
from capital gains, which may have turned to losses with the markets this
year. One forecast suggests California`s recent budget surplus could be
wiped out.

hiccup a couple of weeks ago when people`s attention picked up. But so far
so good. But we are very much aware of what`s going on in the market and
very much aware of how much that can affect our revenues.

WELLS: Still, palmer says state law now mandates a rainy day fund to
help hedge the market.

The second issue, even though California is predicted to continue
adding jobs over the next few years and unemployment will continue to fall,
good luck buying a house. We have an affordability drought.

The median price for a home in San Francisco is now over $1.2
million. It`s close to a half million in L.A.

And forecasters say it`s only going to get worse. More people are
renting and spending more of their income on rent.

PALMER: Well, we`ve seen in terms of the construction statistics
that there`s been a greater increase in construction of multifamily
dwellings as opposed to individual dwellings. And that`s a trend that
we`ve seen for a number of months.

WELLS: Finally, aside from the economic forecast, there`s the
weather forecast, which is brighter. By that I mean wetter.

Rain could ease the drought. And California`s crops will grow, just
as its economy will grow. Though housing costs and market losses could
bring storm clouds nobody wants.

For NIGHTLY BUSINESS REPORT, Jane Wells, Los Angeles.


HERERA: And coming up, why small business owners have a lot to lose
if they don`t upgrade their payment system.


MATHISEN: Small businesses borrowed less in August than in the prior
month. That is the second month of declines according to an index put
together by PayNet. Despite the decline, the level is still higher than a
year ago. Reuters says the index has historically tracked ahead of U.S.
GDP by two to five months.

HERERA: Retailers are now required to have payment systems in place
that accept the new chip-based credit and debit cards.

As we`ve been reporting, those more secure cards go into effect
today, and there`s a big risk for retailers, especially smaller ones, if
they don`t comply.

Kate Rogers (NYSE:ROG) explains.


owner Debbie Ball (NYSE:BLL) is ready for a major change in debit and
credit card systems nationwide to accept EMV, or chip cards that kicks in
today. This meant upgrading her terminal to accept cards that contain a
microchip intended to reduce fraud.

But it also means that merchants, not card issuers, assume
responsibility for fraud if they opt not to make that change.

Ball (NYSE:BLL) owns the Candy Lady Store in Albuquerque, New Mexico,
and makes specialty edibles including those used in movies and on TV. She
upgraded her terminal earlier this year and found the process not only
simple but cheap.

DEBORAH BALL, SMALL BUSINESS OWNER: They gave me a very sweet deal,
particularly since I like to own my own machines. So I ended up with all
their rebates and a rebate from AmEx paying about $39.

ROGERS: Major credit card companies like Visa (NYSE:V) say it will
take time until EMV upgrades reach critical mass, but that adoption among
small businesses like Ball`s has accounted for about 50 percent of the chip
card on chip-enabled machine transactions that it`s seen in the past year.

However, Jasmine Strategy and Research says the top reason small
companies aren`t upgrading is cost because they believe an upgrade will be

But with offerings from Square to Costco (NASDAQ:COST), two
traditional terminal providers like Heartland, the change can be as little
as $40. And it`s well worth it as the cost of data breaches has increased
significantly for small companies in recent years.

In 2014 cyber fraud, which is one part of overall card fraud, cost
small companies an average of $20,000 in damages, up from 8,600 in 2013,
according to the National Small Business Association.

BALL: Any kind of fraud like that, especially for small businesses,
if we lose $1,000, that`s a lot of money. That could be our rent. And if
you`re working on a small margin, you know, you can`t afford losses like

ROGERS: And thanks to the shift to more secure cards, hopefully
small businesses won`t have to.



HERERA: And to read more about how accepting new chip-enabled cards
is impacting small businesses, head to our Web site,

And that`ll do it for us tonight. I`m Sue Herera. Thanks for
joining us.

MATHISEN: And thanks from me as well. I`m Tyler Mathisen.

Have a great evening, everybody, and we will hope to see you right
back here tomorrow night.


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

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