TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Big disappointment.
Fewer jobs than expected were created last month, raising concerns about
the economy and changing the conversation at the Fed.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Reversing course.
Stocks fell sharply, then staged their biggest upward reversal in four
years as investors tried to figure out how to invest in today`s market.
MATHISEN: Doing good. Meet the entrepreneur who had the bright idea
to grow his business while giving back, one pencil at a time.
All that and more on NIGHTLY BUSINESS REPORT for Friday, October 2nd.
HERERA: Good evening, everyone, and welcome.
A setback for the job market and an unusual day for the stock market.
Today`s employment report came as a surprise and not in a good way,
stunning both Wall Street and Main Street.
The U.S. economy added just 142,000 jobs in September, fewer than
forecast. The unemployment rate held steady at 5.1 percent. And it wasn`t
just the September number. Results for prior months were revised lower,
suggesting a down shift in job creation that began this summer.
Hampton Pearson has more on this disappointing labor report.
HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: American
employers sharply cut back hiring in September, and the government revised
job growth downward by 59,000 for July and August. Meanwhile, job growth
for the last three months is averaging just under 167,000 compared to just
under 200,000 per month for all of 2015, much to the surprise of the
leading Wall Street economists.
KEVIN HASSETT, AMERICAN ENTERPRISE INSTITUTE DIR. OF ECON POLICY: If
you get the jobs report like this, then people are starting to think, geez,
you know, this could actually be a negative quarter.
BETH ANN BOVINO, STANDARD & POOR`S CHIEF U.S. ECONOMIST: It`s hard
to see anything good in those numbers.
STEVE RATTNER, WILLETT ADVISORS CHAIRMAN: The economy I think is
clearly weaker than any of us would like it to be or thought it would be.
PEARSON: Headline unemployment remains at 5.1 percent, but that`s
because many Americans stopped looking for work and are not counted as
President Obama says economic weakness overseas is weighing on
American job growth.
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Although the American
economy has been chugging along at a steady pace, much of the global
economy is softening. We`ve seen an impact on our exports, which was a
major driver of growth for us, particularly at the beginning of the
PEARSON: Reduced U.S. exports triggered significant manufacturing
job losses last month. Oil drillers continued to lose workers due to
sharply lower oil prices. Earlier this week, employers announced plans for
nearly 60,000 layoffs in September. At the same time job openings are at
an all-time high, 5.8 million.
September may be a reminder, it`s still an employer`s job market and
for the moment, some are on hold.
MARK HAMRICK, BANKRATE.COM WASHINGTON BUREAU CHIEF: So job openings
look very good but as it turns out the number of hires that employers are
actually engaging in doesn`t quite match that. So, it`s one of these sort
of risk management things the companies really seem to be doing these days,
is seeing a job that`s open and then questioning whether they want to
follow through with a hire.
PEARSON: Those with jobs worked fewer hours last month, and average
wages are up just over 2 percent for the last 12 months. But Americans are
spending more, boosting job growth at the mall and at bars and restaurants.
For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.
MATHISEN: That weak jobs report may well change the timing of a
possible interest rate hike by the Federal Reserve, which many thought
would happen sometime later this year.
Steve Liesman tells us why that is now in question.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s the
second straight jobs report under 200,000 and the first time that`s
happened since the spring. Wall Street commentary seems to suggest this
number takes an October rate hike from the Federal Reserve off the table
and even raises questions about whether the Fed will hike at all this year.
Goldman Sachs (NYSE:GS) says we now see a Fed rate hike in December
as a close call. JPMorgan (NYSE:JPM) says they`re sticking with December
but with less conviction. Over at action economics they say their best
guess is January.
Now, some reiterated calls for a rate hike further into 2016. Some
of the words used, awful, lousy and terrible, just some of the adjectives
to describe the jobs report today. At least the ones we can use on family
television here. The Fed said the labor market was continuing to improve.
The question is whether one bad report will change that outlook overall.
St. Louis Fed President Jim Bullard said the Fed should concentrate
on cumulative economic progress and not one report.
The good news is that markets won`t have to fret over rate hikes for
the upcoming October meeting if Wall Street is right about this. The next
Fed worry moment now becomes November 6. That`s when the next jobs report
comes and we`ll see if the current weakness does a three-peat.
For NIGHTLY BUSINESS REPORT, I`m Steve Liesman.
HERERA: And now to our two guests for their analysis of the weak
jobs report. We`ve brought back Moody`s (NYSE:MCO) Analytics chief
economist Mark Zandi. He was with us last night, who`s very upbeat about
the jobs picture.
And Lindsey Piegza is also with us. She`s chief economist at Stifel
Fixed Income and is a bit more bearish in her views on the labor market.
Welcome to you both. It`s a pleasure to have you here.
Mark, I`ll start with you because last night you were looking for
200,000 plus and you were very upbeat on the jobs market but not only did
we miss on that number but we had downward revisions in previous reports.
Does that change your opinion of the market?
MARK ZANDI, MOODY`S ANALYTICS CHIEF ECONOMIST: No. I do think the
damage from the weak global economy, stronger dollar, lower oil prices and
just the volatility in the financial markets is doing more damage to the
labor market than I anticipated but I view all those things as more or less
temporary, and as we make our way to the end of the year into next, I think
the underlying growth rate in jobs will reappear around 200K. I think
that`s abstracting from the vagaries of the data, that`s roughly where they
So, my views have not changed as a result of this. I`m disappointed
but I don`t think this changes the picture.
MATHISEN: Lindsey, respond there to Mr. Zandi. Do you see it that
way or do you fear this could be the start of something not so good?
LINDSEY PIEGZA, STIFEL FIXED INCOME CHIEF ECONOMIST: Well, it was
certainly a disappointing report but I would actually argue this has been a
declining trend in the rate of hiring for quite some time. Remember last
year, we were hiring at a pace well over 300,000. That slowed to 250,000
and now with this report, coupled with the downward revision to the
previous month, we`re now talking about an average of 167,000 —
MATHISEN: So, what does that mean for economic growth and where you
see it in this third quarter — well, the third quarter that just ended and
in the fourth?
PIEGZA: Well, a slowdown in hiring typically translates into a
slowdown in economic activity. So for the second half of the year we`re
looking for about 1 1/2 percent to 2 percent GDP. Still positive but
certainly not the 3 percent, 4 percent GDP you would expect from an economy
after six years of zero interest rate policy.
HERERA: You know, Mark, we just ran that piece by Steve Liesman
saying that now there are some who are questioning with the downward
revisions in previous months whether or not the Fed will actually move this
year. Lindsey`s been on the record for several years now saying they`re
not going to move until 2016. Does it change your opinion?
ZANDI: No. I think December is still the most likely, though into
2016 is certainly plausible. I mean, I do think a necessary condition for
them to raise rates is for my forecast of 200,000 jobs per month to be
accurate and true and that shines through by December. It also is
predicated on the expectation that the volatility in financial markets
abates and we have more stable conditions.
So, things have to come together. I think they will. So I think the
most likely scenario is December. But, you know, I don`t think I`d argue
too strongly if it were January or sometime early in 2016.
MATHISEN: Lindsey, soggy job numbers for September, downward
revisions for August and July. The pace is clearly slowing but what
happens in October, November, December as so many companies add seasonal
workers, whether it`s UPS or Walmart or Target (NYSE:TGT)? Does that in
and of itself help hiring?
PIEGZA: Well, remember, we account for that with seasonal
adjustments. So that`s not going to play a major role here. And actually
if you want to look at the pace of seasonal hiring over the past several
years, it`s now being spread out into the third quarter as well. So,
actually, those seasonal adjustments may serve to undermine some of the
more positive growth that we would see in the final quarter of the year.
HERERA: When you look at the global environment, how healthy do you
think it is? I mean, obviously, we`ve been a shining star of the global
environment but we also do not live in isolation anymore as an economy.
HERERA: So, when you look globally, how do things look to you?
PIEGZA: Well, the Fed has been watching the international
environment, and that has added another layer of concern, of potential
contagion from the slowdown abroad. They`re concerned about international
volatility in equity markets. They`re concerned about declining demand in
commodity prices, essentially allowing us to import deflation, and, of
course, a rapidly rising U.S. dollar makes U.S.-made goods relatively more
expensive, putting downward pressure on manufacturing and jobs creation
here at home.
So, when we take a step back and we look at that very disappointing
outlook, that sluggish activity level on the international plane, that`s
going to have compounding negative impacts here in the U.S.
HERERA: All right. Thank you both very much. Have a great weekend,
Lindsey Piegza and Mark Zandi with Moody`s (NYSE:MCO) Analytics.
MATHISEN: And on Wall Street today, investors witnessed the biggest
upward reversal for stocks in — get this — four years. Equities plunged
at the open, along with bond yields on that weak jobs report, only to
change course and end the day higher, much higher.
The Dow Jones Industrial Average up 200 points after being down as
many as 258. That`s a 450-plus-point move. The NASDAQ rose 80. The S&P
500 tacked on 27.
Today`s rally helped the three major indexes finish higher for the
weak, as you see right there. Part of the reason for the stock market
reversal was a rise in domestic crude prices, which today settled up nearly
And the yield on the 10-year note fell below 2 percent, tumbling as
low as 1.9 percent this morning. Later in the program, our market monitor
will help you figure out how to invest in this market, and he`ll offer
HERERA: And with the job report coming in weak, many are looking to
the transport sector for clues about the health of the economy, because
when the economy does well, people and businesses tend to ship more things.
And when it doesn`t, the industry slows.
Morgan Brennan takes a look at the message this sector is sending.
MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: A
disappointing jobs report from the Labor Department may be confirming what
the transportation sector has been indicating for some time. U.S. economic
growth is showing signs of slowing down. Transports have been long
considered a gauge of economic health.
Since so many goods for so many industries must come in contact with
a train, ship, or truck. Analysts say the sector has been telling a tough
story all year.
DONALD BROUGHTON, AVONDALE PARTNERS TRANSPORTATION ANALYST: It was
certainly the first industrial-led recovery we`ve had since 1961 in this
economy, from `09 through `14. But today, we`re seeing what appears to be
the first industrial-led recession in a long time.
BRENNAN: The prolonged downturn in the commodity complex has been
weighing on stocks exposed to crude oil and other materials. Rail car
loadings for U.N. Pacific, Norfolk Southern (NYSE:SO), CSX (NYSE:CSX),
Kansas City Southern (NYSE:SO) (NYSE:KSU), and Berkshire Hathaway`s BNSF
continue to disappoint, thanks to weakness in coal, petroleum products and
Last week, commodity carloads were down 6 percent, marking the 29th
straight week of declines. The commodity collapse and its effects on the
industrial economy have also weighed on the less than truckload fleets that
truck goods for multiple customers with one vehicle.
LTL carriers deliver many industrial goods and raw materials. One
reason FedEx (NYSE:FDX), which has a large LTL business, recently trimmed
its earnings forecast.
But another more worrisome trend may be emerging. Data for trucking
fleets that largely haul goods for consumers are starting to disappoint,
suggesting that the part of the economy that has been holding up, the
consumer economy, may be beginning to wane.
BROUGHTON: From the beginning of the year, we were also looking for
the consumer to take that reduced cost of the commute, reduced cost of
heating and cooling their house, and spend that money elsewhere. We so far
just have not seen that. It`s been worrisome, troublesome, and as truck
tonnage is continuing to tell us, the consumer`s just not spending.
BRENNAN: One area that`s remained a bright spot is inbound container
floats, or wares coming into the country through the ports, much of it in
anticipation of the holidays.
But as other transport data weakens and as the labor market shows
signs of cooling, the question now, will the peak holiday season be as
strong as everyone has been hoping?
For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan.
MATHISEN: Still ahead, the winds of change. One industry where
demand for workers is on the rise, running counter to today`s dismal jobs
MATHISEN: Retail brokerage firm Scottrade suffered a data breach.
The discount broker says it believes its systems were attacked between late
2013 and early 2014. The hackers targeted client names and addresses.
Scottrade says it is notifying 4.6 million customers and offering them
identity protection services.
HERERA: Employers may have added only 142,000 jobs last month, but
there are some industries where jobs are on the rise, no matter which way
the economic winds blow.
Mary Thompson reports on the need for wind turbine workers from
Sweetwater, Texas, in our latest installment of “Where the Jobs Are.”
MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Sweetwater
made its name as a railroad hub, but it`s banking on a future in wind. The
more than 1,300 turbines dotting its skies mean plenty of work for turbine
servicers like Shermco Industries — if can find the workers.
UNIDENTIFIED MALE: We have the jobs, but we can`t find the people.
THOMPSON: The Bureau of Labor Statistics says jobs for wind
technicians should grow an above-average 24 percent by 2022. Driving the
increase, a rise in the number of turbines being installed as a cost of
wind-generated electricity has dropped in half over the last five years.
HEATH INCE, TEXAS STATE TECHNICAL COLLEGE: When our students
graduate, I would say almost about 98 percent of them place.
THOMPSON: Heath Ince runs a wind energy technology program at Texas
State Technical College. He works with the industry to ensure the two-year
program produces workers with the right skills.
INCE: They`re looking for guys that can read schematics, they can
have mechanical and electrical skills.
THOMPSON: Those skills needed for years to come.
Wind-generated electricity accounts for just under 5 percent of the
U.S. total now, but is seen more than doubling to 10 percent by 2020.
HAROLD PERRIGO, TEXAS STATE TECHNICAL COLLEGE STUDENT: It`s a young
industry and it`s something that`s going to grow exponentially over the
next 10 or 15 years.
THOMPSON: Thirty-three-year-old Harold Perrigo (NASDAQ:PRGO) left
Pennsylvania for Texas and a career in retailing so he could study to be a
Along with plenty of work, being a wind tech pays well too,
especially in markets like Texas, where Shermco`s CEO Ron Widup says
competition for talent is stiff.
RON WIDUP, SHERMCO INDUSTRIES PRESIDENT & CEO: You`re coming in as
entry-level job probably $40,000, $45,000 a year. Then there`s an overtime
element. So you can very quickly get up to $60,000 or $80,000 a year. And
then in a few years, it`s not uncommon to get to a six figures pretty
quickly in this field.
THOMPSON: The steadiness of the work and pay a welcome change for
34-year-old Jeremy Brackenridge.
JEREMY BRACKENBRIDGE, SHERMCO INDUSTRIES EMPLOYEE: I`m making about
10 percent more than I was.
THOMPSON: He`s held a number of jobs, most recently in oil and gas.
Laid off there, he`s now training in-house at Shermco to become a
technician, energized by the possibility of a future in wind.
In Sweetwater, Texas, I`m Mary Thompson for NIGHTLY BUSINESS REPORT.
HERERA: And to learn more about the demand for wind turbine workers,
read Mary`s story on our Web site at NBR.com.
MATHISEN: We begin tonight`s “Market Focus” with reports that Sprint
is planning major cost cuts according to “The Wall Street Journal.”
The wireless carrier could save $2.5 billion in costs. The cost cuts
will result in some job reductions. The company currently employs more
than 31,000 people. Shares rose almost 5 percent on that news to $4.25.
The snack maker Mondelez is exploring a sale of several of its
European businesses, that`s according to a Reuters report. The company`s
cheese and grocery business in Europe could fetch around $3 billion in a
sale. Shares rose 3 percent to $43.56.
Novocure made its Wall Street debut today. The company, which makes
a device to treat a form of brain cancer, priced its offering below the
expected range and still saw its shares fall in their first day of trading.
Despite the down day, though, the CEO is confident in the decision to go
(BEGIN VIDEO CLIP)
BILL DOYLE, NOVOCURE EXECUTIVE CHAIRMAN: We want to be completely
ready to bring this therapy to patients not only in the U.S. but we`ve just
started commercialization in Europe and we`ve just received our first
approval in Japan. So, again, markets will be choppy. They`ll go up and
down but if we take care of the cancer patients, stockholders will be in
good shape in the long term.
(END VIDEO CLIP)
HERERA: Shares were off almost 17 percent to $18.28.
United Airlines saw its shares fall as a union for maintenance
technicians says the airline is dragging its feet in stalled talks. The
union has been in negotiations with the carrier since November of 2012.
The stock was off more than 2 percent to $51.76.
MATHISEN: And now to our market monitor, who doesn`t believe the
market is out of the woods just yet. So he`s being, he says, selective and
cautious with his buying. He`s Jeff Saut, chief investment strategist at
Last time he was on nearly 18 months ago, he recommended Dexcom,
which is up 128 percent, and Johnson & Johnson (NYSE:JNJ), which is down 5
Jeff, welcome. I didn`t know it was that long.
Do you still like both of those companies, Dexcom and J&J?
JEFF SAUT, RAYMOND JAMES CHIEF INVESTMENT STRATEGIST: I do. I think
that for conservative folks Johnson & Johnson (NYSE:JNJ) has a favorable
rating from our analysts and it has a night portfolio of businesses. And
Dexcom makes the best wireless glucose monitoring system on the planet.
HERERA: All right. Let`s get to some of your picks. I hope I`m
pronouncing this right. Stonemor partners LP?
SAUT: Yes. Bottoms tend to be a process not an event. We had an
event last fall on October 15th where you had a V-shaped bottom. But most
of the time you come down into a capitulation low and then it takes six to
eight weeks to form a bottom.
So, we`re not sure the bottom has been made but if we are making a
bottom I`m going to be conservative with the yield name. Stonemor is like
a death stock, cemeteries, has decent yield to it. Our analyst has a
strong buy rating on it.
MATHISEN: All right. Let`s move on to Genesis Energy (NYSE:GEL) LP.
Tell me what they do and why you like them.
SAUT: They are a midstream master limited partnership. So they`re
basically a toll taker. They don`t have great price sensitivity to crude
oil. The crude oil`s got to go through the pipes. It`s got to be stored
somewhere. Grant Sims is the CEO. He`s arguably the best CEO in the
space. We think they`re going to continue to increase their distribution
and our analysts like that one as well.
HERERA: And Flaherty & Crumrine Preferred Securities.
SAUT: Yes, Don Crumrine is arguably the best straight preferred
portfolio manager on the planet. He ran portfolios for Charlie Munger and
Warren Buffett in the preferred space. He`s got two closed end funds that
are trading at a discount to their net asset values with really decent
MATHISEN: Let`s turn back to the market more broadly after today`s
jobs report. Are you optimistic that the market could end the year higher
even though in this most immediate term you describe yourself as selective
and cautious? What do you think?
SAUT: Well, our models turned cautious in the first part of July.
We said the markets are going into a period of contraction. I didn`t think
it would be this deep. I do think we`ve made a capitulation low on the
24th and 25th of August.
So, if I had to bet, I would bet stocks are higher by year end rather
HERERA: And what does the fed do and when?
SAUT: You know, I think that when it does it is not important. I
think it`s the trajectory and the pace of rate increases. My model has
always called for a November increase even though there`s no FOMC meeting.
That`s certainly an out of consensus call.
HERERA: It sure is. We`ll have to have you back in November, Jeff.
We don`t want it to be this long again. Thanks for joining us. Jeff Saut
with Raymond James.
SAUT: You bet.
HERERA: Coming up — pens, papers and paper clips. Meet the
entrepreneur who`s making back to school cool and giving back in the
process. This month`s bright idea is next.
HERERA: Here is what to watch next week. On Thursday, the Federal
Open Market Committee will publish the minutes of its September policy
meeting, and Wall Street will be watching.
On the data front, a report on international trade, consumer credit,
among others, and Alcoa (NYSE:AA) will report its earnings, marking the
unofficial start to the earnings season. And that is what to watch next
MATHISEN: All right. We talk about it every year. Parents can
spend $200 or more per child on school supplies — those who can afford
supplies, that is. Teachers also spend money out of their own pockets,
$500 on average.
That`s why one company got the bright idea to help families get some
newer, funkier school supplies into the hands of young students who need
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Good morning, everybody!
CROWD: Good morning!
MATHISEN: At the Camino Nuevo Charter Academy in a part of Los
Angeles where the median income is less than $28,000 a year, Ido Leffler`s
school supplies are a welcome gift.
Leffler got the idea to help after shopping with his own kids back in
IDO LEFFLER, YOOBI CO-FOUNDER & CEO: They basically ignored the
school supplies aisle. If I`m not excited about what`s in the aisle and my
kids aren`t excited about what`s in the aisle, that`s low-hanging fruit.
So, we decided to funk it up a little bit.
CROWD: His company, Yoobi, didn`t invent finders and pencil cases.
It redesigned them. Bright colors, tactile textures, jumbos and minis.
The products are fun.
But Yoobi is serious about its mission. For every item it sells, it
donates one. For a while, Leffler could have used that kind of help when
he was growing up in Australia.
LEFFLER: I know what it`s like for my mother as a schoolteacher to
pull money out of her own pocket to buy supplies.
MATHISEN: His dad`s real estate business had failed back in the
1990s. Things are just fine now, and Leffler has started several
companies. His Yes To is a hit in the all-natural beauty products space,
which helped get him a meeting with a contact at Target (NYSE:TGT) to pitch
LEFFLER: I said to her would you like to turn around and see the
product? And she looked me and looked me straight in the eye and say, Ido,
I don`t have to. We`re going to impact millions of kids. Let`s do this.
MATHISEN: Boom is right. Yoobi launched in June 2014 and did $20
million in sales in a year. Its donations have impacted more than a
Still, some wonder how effective the buy one/give one model can be.
CHRIS MARQUIS, CORNELL UNIVERSITY: One of the big criticisms of the
model is that it doesn`t address the root causes of the social issue.
MATHISEN: Cornell University`s Chris Marquis has written about how
companies like Tom`s Shoes and Warby Parker with its eyewear have addressed
symptoms without actually solving any problems. Raising awareness is a
plus, but to be successful, the cause has to resonate with consumers and
the price point has to make sense for the company.
MARQUIS: There`s a lot of research that shows that younger consumers
actually want to give back, they want to actually have some sort of social
impact, so I think actually this market will continue to grow.
LEFFLER: The first thing we need to do is make her a Yoobi teacher.
MATHISEN: Yoobi also helps teachers like Camino Nuevo`s Maria
Cortez, who spends a lot of her own money on her students.
MARIA CORTEZ, TEACHER: Over 1,000 a year. For them, what it means
is they are valued, right? Like our classroom is valued, our school is
valued, their work is valued. And I tell them they are the leaders of the
future. And Yoobi is really supporting that for our children.
MATHISEN: After all, it`s teachers like Cortez and Ido Leffler`s mom
who can inspire students to put themselves into the equation when it comes
to solving the products of the future.
LEFFLER: It doesn`t matter what widget you`re selling. If you`ve
got a cause that everybody is fully committed to, then you`re able to do
things that really translate to magic.
MATHISEN: Yoobi even caught the attention of the entertainer Usher
who chipped in and helped design a new line this year and also participated
in one of Yoobi`s giveaway events at a different school in Los Angeles back
in May. More and more companies and more and more customers want their
purchase to be linked to a purpose.
HERERA: To a purpose. Absolutely. Well, good for him. Because you
know, the start of the new school year should be one that`s positive for
kids I think. That helps.
That does it for NIGHTLY BUSINESS REPORT for tonight. I`m Sue
Herera. Thanks for joining us.
MATHISEN: And thanks for me as well. Have a great weekend,
everybody. We will hope to see you right back here on Monday.
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