Transcript: Nightly Business Report – September 2, 2016

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

SHARON EPPERSON, NIGHTLY BUSINESS REPORT ANCHOR: Now what? A good but not
great jobs report puts a wrench in the Fed`s plans to possibly raise interest rates. Or does it?

BILL GRIFFETH, NIGHTLY BUSINESS REPORT ANCHOR: Drug plan. Hillary Clinton
jumps into the fray as she pledges to crack down on drug price hikes.

EPPERSON: And shifting mindset. Meet the entrepreneur hoping to change
the way Americans get around town.

All that and more for Friday, September 2nd.

Good evening, everyone, and welcome. I`m Sharon Epperson, in tonight for
Sue Herera.

GRIFFETH: And I`m Bill Griffeth, in for Tyler Mathisen this evening.

You know, for all the hand-wringing, the anticipation and the questions
about interest rates leading up to today`s jobs report, the number itself
left us with more anticipation and hand-wringing and questions, that`s
because the data showed the pace of hiring slowed in August and while it
was considered a solid report, it did cast some doubt on whether it`s
enough for the Fed to act.

The economy added 151,000 new jobs last month. That was below the
estimates of 180,000. And it was down more than 200 — from the 270,000 we
saw in June and in July. By the way, the unemployment rate held steady at
4.9 percent.

Hampton Pearson tells us what it all means.

(BEGIN VIDEOTAPE)

HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: In August,
employers slowed hiring and barely raised wages. The manufacturing and
construction sectors lost a combined 20,000 jobs. Labor Secretary Thomas
Perez cited weak global expansion and the strong dollar as headwinds for
U.S. manufacturers.

THOMAS PEREZ, LABOR SECRETARY: Manufacturing is an export-dependent
industry, and when you have a strong dollar and you have so many other
economies that haven`t seen our recovery, that`s a real challenge.

PEARSON: Average hourly earnings now just under $26 an hour, barely moved
in August and are up just 2.4 percent year over year. Fed watchers say
today`s wage number is not what Fed Chair Janet Yellen wants to see as a
condition for raising key short-term interest rates.

DIANE SWONK, DS ECONOMICS FOUNDER & CEO: The slowdown in average hourly
earnings, that`s enough to sit people back on the sidelines within the Fed,
as well. I think that`s very important.

PEARSON: Even with the August slowdown, job growth for the last three
months still averages 232,000 jobs per month. Enough over time to also
lower the unemployment rate. At a recent Washington D.C. area jobs fair,
most applicants already had jobs and even middle aged job seekers were
looking for opportunities to move up.

DALE RENDER, 44-YEAR-OLD JOB SEEKER: Even though I personally have a job
or have several jobs, just to find that job that I can really put
everything into and feel more accomplished with has been the difficulty for
me.

DIEM TRAN, 43-YEAR-OLD JOB SEEKER: I`ve been looking for a few months and
I`m not discouraged yet.

PEARSON: Meanwhile, the August slowdown is latest twist in the debate over
the Fed rate hike.

JAN HATZIUS, GOLDMAN SACHS CHIEF ECONOMIST: It`s possible that they wait
until the December meeting, but I think chances are little more likely that
it`s going to be September.

AUSTON GOOLSBEE, FORMER OBAMA COUNCIL OF ECON. ADVISER CHAIR: It would
require a pretty solid case to raise, I think, for them to weigh in before
the U.S. presidential election.

JOHN SILVIA, WELLS FARGO SECURITIES: I think the gate is wide open. The
FMOC needs to drive the truck through.

PEARSON: It turns out the August jobs report has a history coming in way
below expectations. Over the last five years, it`s been revised upwards on
average by some 70,000 jobs.

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

(END VIDEOTAPE)

EPPERSON: Stocks get a bump after that jobs number was interpreted as
increasing the likelihood that the Fed won`t act this month. The Dow Jones
Industrial Average rose 72 points to 18,491, the NASDAQ climbed 22, and the
S&P 500 added nine. For the week, all three indices rose around half a
percent.

Now, let`s bring in Anthony Chan for more on today`s jobs report. He is a
chief economist at Chase.

Anthony, one of the items that comes up all the time, we heard from one of
the job seekers in the report earlier is that they have several jobs
already. They`re looking for a full-time job, big debate of whether we`re
seeing job growth in terms of full-time or part time jobs. What do we
glean from this month`s employment report about that debate?

ANTHONY CHAN, CHASE CHIEF ECONOMIST: Well, we clearly see we are creating
jobs. We know the Federal Reserve has estimated, we need about 100,000
every month just to absorb the natural growth in the labor force. So,
whether you look at the establishment survey, where you got 151,000, or you
look at the household survey, you got 97,000. Both of them are right in
the same zip code.

There are a lot of jobs out there and I don`t think that this is an economy
that`s faltering in anyway. And as for full-time versus part time jobs,
you constantly hear that we`re not creating full-time jobs, but rather —
but still since the economic expansion began, we created 11.8 million full
time jobs and for those people out there that are saying, it`s all part
time jobs, we have actually lost 530,000 part time jobs since the economic
expansion began. First time we have ever seen that in any expansion since
1970.

GRIFFETH: And yet, the Fed is not moving yet. For all the hand wringing
and questions I was mentioning earlier, Anthony, isn`t it possible that
this is the new normal and going to be like this for the foreseeable future
and we should stop anticipating when the Fed is going to start raising
rates?

CHAN: I think you are right, Bill. We know that the Federal Reserve and
in the very slow growing economy, that is disappointing by its very nature,
growing sub par relative to other expansions, we know that the interest
rate, Federal Reserve needs to sort of stave off inflation is much, much
lower. In fact, they spent a lot of time in Jackson Hole discussing this
and that`s one of the reasons why I think the Federal Reserve has the
luxury to wait, not indefinitely but until the end of the year just to be
more certain that the economic expansion is on track.

So, I don`t think there`s any cost whatsoever, especially when core price
PCE, which is the inflation rate they monitor, is below 2 percent. It`s
1.6 percent year over year. What did Janet Yellen tell us at Jackson Hole?
It would be a few more years before inflation gets to the point where it
meets the Federal Reserve target.

EPPERSON: Is there anything that may change your mind, Anthony, in terms
of when we will see the Fed move? You say the end of the year. What other
data points are you looking for that may change that time frame?

CHAN: Well, we can see more indication that retail sales is getting a
little bit stronger. We could see more indication that other parts of the
economy are getting stronger. There`s a lot of things between now and
September that can change our minds slightly. But right now, it looks like
the odds have to be in favor of December rather than September.

EPPERSON: All right. Thank you very much, Anthony Chan, with Chase.

CHAN: Pleasure.

GRIFFETH: Hampton Pearson just told us where the jobs aren`t right now.
So, now, we`re going to tell you one place where they are. With
presidential campaigns in full swing, the need to staff a new former
president`s protection detail this January and a combined 17 percent of
special agents and uniformed officers up for retirement means the Secret
Service is definitely on a mission to hire.

And our Kate Rogers (NYSE:ROG) looks to enroll.

(BEGIN VIDEOTAPE)

KATE ROGERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you`re looking for
a high energy, hard charging career, the Secret Service may be right for
you. They`re aggressively hiring.

RENNEE TRIPLETT, U.S. SECRET SERVICE HUMAN RESOURCES: We need someone
who`s a self starter, a self initiator, just a high caliber, high quality
individual.

ROGERS: But it`s not an easy job to get. Only between 10 percent and 12
percent of more than 22,000 applicants for uniformed division and special
agents this year will make it past best qualified onto the background check
phase of the process.

TRIPLETT: We do have a very rigorous hiring process that includes series
of interviews, a background investigation. We employ the polygraph, as
well as drug screenings.

ROGERS: Salaries are competitive, ranging from $45,000 a year on the low
end, to nearly $100,000 on the high end depending on the role. Agents also
have an opportunity to be placed globally and witness history, protecting
politicians and dignitaries.

Special agent trainees like 28-year-old Erica Remshard, a former cyber
threat analyst, are doing things they have never done before. From
learning the protect the president during public appearances like rope line
meet and greet, to honing firearms skills, controlled braking and evasive
driving techniques.

Remshard didn`t come from a law enforcement background but is being brought
up to speed in the training.

ERICA REMSHARD, SECRET SERVICE SPECIAL AGENT TRAINEE: Not having a prior
law enforcement experience, I was kind of nervous about applying to the
Secret Service, but they made me understand they`re going to teach you from
the bottom up.

ROGERS: Ability to handle the rigors of physical training is paramount to
the success of trainees here.

REMSHARD: They hold everyone to high PT standards, fitness standards. I
think the guys are a little intimidated by me. I do have a strong fitness
background.

ROGERS: And being strong mentally and physically is key for trainees. I
spent two days here at the James Rowley Training Center in Beltsville,
Maryland, and the regimen is not for the faint of heart.

From shooting.

UNIDENTIFIED FEMALE: Police. Drop your weapon!

ROGERS: To driving.

UNIDENTIFIED MALE: Let off right here. Get back on. Minimize your input.

ROGERS: And, of course, physical fitness, I was pushed to the limit.

I need help.

Above all else, trainees need to display a true willingness to serve.

TRIPLETT: You`re going to have to be flexible and be able to adjust at a
moment`s notice. The best laid plans always go awry and I think an
individual absolutely needs to have flexibility built into their mindset.

ROGERS: For NIGHTLY BUSINESS REPORT, I`m Kate Rogers (NYSE:ROG),
Beltsville, Maryland.

(END VIDEOTAPE)

EPPERSON: We`re also following this story, Hurricane Hermine made landfall
overnight in Florida, the first o do so I more than a decade. It`s now
been downgraded to a tropical storm as she churns up the Atlantic Seaboard.
Residents, businesses and even ports are preparing for this, and Morgan
Brennan is riding out the storm in Savannah, Georgia.

(BEGIN VIDEOTAPE)

MORGAN BRENNAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: State officials
warned that heavy rains, possible tornadoes, power outages and perhaps most
pressingly, the potential for flooding, with as many as 15 inches of
rainfall expected in some isolated areas. The governors of Florida,
Georgia and North Carolina declared states of emergencies and in Florida at
least one storm-related death was confirmed.

But as Hermine barrels up the Eastern Seaboard, property insurance
companies are also preparing for claims.

Throughout the region, schools and businesses were closed, even the port of
Savannah, which is the fourth largest container port in the country, began
closing down operations last night. And two hours north of here in
Charleston, the port complex there closed down operations midday today.

In Florida, officials are concerned about another natural threat, as well.
That`s pools of standing water could lead to the spread of the Zika virus.
But here in Savannah, many visitors are stranded, many of them staying in
these hotels here along downtown`s riverfront. The Savannah airport is
operating but a number of flights have been canceled, most notably flights
in and out of New York City, Philadelphia, Washington, D.C. and Charlotte,
North Carolina.

For NIGHTLY BUSINESS REPORT, I`m Morgan Brennan in Savannah, Georgia.

(END VIDEOTAPE)

GRIFFETH: Coming up, our market monitor this week says he has three stocks
you need to own for a long haul.

(MUSIC)

EPPERSON: Well, say good-bye to those antibacterial soaps. The Food and
Drug Administration is banning 19 ingredients, including some common ones
in the popular soaps and washes. The FDA said there`s no proof they work
better than conventional soap and water or that they`re even safe.

GRIFFETH: Wait until my wife hears about that.

Amid the outcry of a dramatic rise in the cost of EpiPens, Democratic
nominee Hillary Clinton has rolled out a plan to address what she calls
excessive price hikes on drugs.

Our John Harwood joins us from Washington tonight.

John, what exactly did Secretary Clinton propose?

JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, Bill, nimble
campaigns react to public outrage and Hillary Clinton did that today by
saying that she`s going to create a consumer oversight board to monitor
these kind of price increases. It would be composed of representatives
from various agencies with oversight over pharmaceuticals and also health
care so places like the FDA and the HHS, Health and Human Services
Department.

Don`t know exactly who would be on it. They rolled this out rather quickly
in response to the controversy but she`s saying she`s ready to roll and
monitor what those drug companies are doing in the pace of increases.

EPPERSON: How likely would it be possible for her to roll this out without
any type of legislation from Congress?

HARWOOD: Some of what she is proposing could be done. For example, she
says the board, Sharon, could waive import restrictions on alternative
measures of dealing with patient`s problems if the particular thing like
the EpiPen goes up too fast. But other things like penalties on drug
companies that raise their prices too fast, that would require legislation
from Congress.

GRIFFETH: I`m going to send cynical on this but many traders and even
health care industry CEOs have said to me during interviews that this comes
up every four years it seems and then it goes away after the election. Any
reason to believe that it won`t happen again this time?

HARWOOD: Certainly could happen. We`re talking about a board created for
a relatively small number of cases, like the case with Mr. Shkreli earlier
this year and also the Mylan (NASDAQ:MYL) case. But we do have two
nominees this year who both proposed, for example, to give the federal
government the power to negotiate with big pharma over the cost of the
federal government pays.

So, there is some clear inclination on behalf of both parties to get a
little bit tougher, whether it will take this form in the end, don`t know
for sure.

EPPERSON: Both parties as you said addressed this issue in some form. Is
the Trump campaign saying anything about drug pricing, or what are they
likely to say?

HARWOOD: Well, interestingly, Sharon, you know, they have — Donald Trump
has talked about using negotiating authority. So, that`s on the record.
But today, the Trump campaign did not comment on this proposal by Hillary
Clinton. They were trying to keep the attention focused on the details of
that FBI interview that was released today, the summary of the FBI
interview related to Hillary Clinton`s e-mails.

GRIFFETH: John Harwood in Washington, thanks for joining us, John.

HARWOOD: You bet.

EPPERSON: Yum Brands (NYSE:YUM) is selling off some of its China unit
before going public. That`s where we begin tonight`s “Market Focus.”

The owner of KFC and Pizza Hut said it will sell a $460 million stake in
its Chinese operations to a private equity firm and a subsidiary of e-
commerce giant Alibaba. The business is expected to be spun off from Yum
Brands (NYSE:YUM) by the end of the October and will begin trading
independently on the New York Stock Exchange in November. Shares rose 50
cents to $91.26.

Investors sold off shares of VeriFone following last night`s disappointing
quarterly results. The payment terminal company posted worse than expected
revenue and a surprise loss, saying the process of integrating new machines
into the businesses has not been running smoothly. VeriFone also gave
yearly guidance that missed estimates. Shares fell 16 percent to $16.81.

GRIFFETH: Smith & Wesson stock hit today. It`s not exactly clear why.
Last night, the gun maker said it saw the profit double as it benefited
from strong demand for firearms. Those results topped estimates. Sales of
the gunmaker also came in higher than expected, prompting the company to
significantly raise its full-year outlook. Nonetheless, traders sold on
the news. The stock down by 6 percent to $27.69.

And shares of Lululemon continue to fall after the apparel company issued
weak guidance after the bell yesterday. Overall, the company did report a
rise in profit, topping analyst` estimates. Shares also got a lift and
were in line with expectations. But Lululemon finished down more than 10
percent today to $68.57.

EPPERSON: Our market monitor likes stocks he says should be in the
portfolio for the long haul. This is his first time joining us on the
program. He is George Schultze, founder of Schultze Asset Management.

George, thanks so much for being with us.

GEORGE SCHULTZE, SCHULTZ ASSET MANAGEMENT FOUNDER: Thanks for having me.

EPPERSON: You know, we talk about so much on this program, interest rates
and the election, that`s what`s top of mind for many investors. You say
there`s going to be a lot of volatility in 2016, but focus on stocks that
you can own for the long haul. Why do you like despite what we have seen
with auto sales numbers recently, GM?

SCHULTZE: GM is just incredibly cheap. It is one of the — Warren Buffett
is one of their largest shareholders. After the company emerged from
reorganization a few years ago where they eliminated $60 billion in debt,
its balance sheet is extremely strong. For the second quarter, they had a
record quarter. Extremely strong earnings per share, management increased
guidance for EPS for the rest of the year, up to almost $6 a share.

And frankly, it is just incredibly cheap. It`s one of the cheapest stocks
on the market. It`s trading at about 5.3 times P/E. It also has a nice
fat dividend yield, almost 5 percent, which is a pretty good alternative to
today`s extremely low interest rates looking to collect income.

GRIFFETH: Right. You know, GM, I get, in the auto sector but you have
Fiat Chrysler on there. There`s a company that`s really struggling right
now. Why them?

SCHULTZE: Well, a lot of people think it`s struggling but it`s not. It`s
actually quite an interesting turnaround. The company also has a very
strong balance sheet.

A couple of years ago, they bought — Fiat bought Chrysler for practically
zero out of bankruptcy and left behind $20 billion in debt. Earlier this
year, Fiat spun off Ferrari and shareholders of Fiat got shares of Ferrari
as part of that transaction.

Going forward, we think they might spin off Maserati, and they`ve also spun
off RCS Media. And there`s a plan to maybe also spin off their components
business.

EPPERSON: I want to ask you about the stock, you say the monster bank to
own is Bank of America (NYSE:BAC). Why do you like Bank of America
(NYSE:BAC) for the long haul?

SCHULTZE: Bank of America (NYSE:BAC) is just — it`s a rock solid bank,
record capital, liquidity level since the crisis. The company has $1.5
trillion in loans and earning assets on its balance sheet. Warren Buffett
is the largest shareholder. If you do believe interest rates are going up,
this bank will make more net interest income as they go up on that huge
book of loans and other assets.

EPPERSON: Great picks there. Thank you very much, George Schultze with
Schultze Asset Management.

SCHULTZE: Thanks for having me.

GRIFFETH: Well, you have heard of electric cars. We`re going to show you
a man who`s introducing Americans to electric bikes, coming up.

(MUSIC)

EPPERSON: Remember that computer outage a few weeks ago at Delta? Well,
now, the bill has come due. Delta says that outage cost it $100 million in
lost revenue last month. The computer failure stranded passengers and cost
thousands of canceled flights over several days.

GRIFFETH: Finally tonight, problem solving, multitasking and dealing with
the unexpected are traits of military veterans can bring to — running a
business. And one vet who brought those home from at least, along with a
debilitating back injury, his desire to get active and get back in shape
led him to electric bicycles and now he`s staking a claim in this niche but
fast-growing market.

(BEGIN VIDEOTAPE)

GRIFFETH: Before he found electric bikes, back pain limited Chris Nolte`s
ability to exercise, to work. Indeed, to live life. He hurt his back
while serving in the military.

CHRIS NOLTE, PROPEL ELECTRIC BIKES FOUNDER: I grew up very quickly in the
military. You know, I went in at 19 years old. I was overseas at 20, 21.

GRIFFETH: In 2000, Nolte joined the Army Reserve. He operated fuel supply
trucks, a truck landed in a ditch in Kuwait, only days before the start of
the Iraq War in 2003. And despite hurting his back, Nolte stayed on four
months before coming home to Long Island.

NOLTE: I was very concerned when I returned about what my future is going
to look like.

GRIFFETH: Physical labor business not an option. By 2006, he was helping
a family friend put his luggage sales business online. He was immersed in
e-commerce when in 2011, he discovered electric bikes — online, of course.

Nolte converted his own bike and got the push he needed to get back on the
road.

NOLTE: I didn`t need to focus on where I was limited with my physical
abilities and I just kept on learning.

GRIFFETH: He learned that 180 million electric-powered bikes are on the
roads in China. Many use motorcycle-like throttles but now pedal-assist
bikes are becoming more popular. The motor is engaged only when the rider
pedals. Bosch eBikes Systems makes drive mechanisms of many popular bike
brands.

The CEO recently said 1 out of every 3 bikes sold in the Netherlands is
electric. In Germany, more than 1 in 5 new sales are e-bikes but in the
U.S. it`s barely more than 1 out of 100.

Sensing an opening, Chris Nolte began selling e-bikes online in 2011.

NOLTE: Our first year, we did about $50,000 in business. And then we were
pretty much tripling for every year after that in size. Up until 2014, we
hit $1 million in sales.

GRIFFETH: Nolte says 2016 will be his third year in a row with sales of at
least $1 million. Last year, he opened a retail shop in Brooklyn, New
York. Most of his bikes sell in the $2,500 to $4,000 range. Baby boomers
looking for help exercising or just getting around are natural customers
but Nolte says millennials are buying in, too.

TYLER GLASS, E-BIKE CUSTOMER: I don`t have to deal with parking. I just
pull it into the living room at night.

GRIFFETH: Tyler Glass paid about $3,500 for an e-bike to travel 10 to 20
miles in New York City pretty much every day.

GLASS: I fell in love the second I rode one.

GRIFFETH: For the business to thrive, Nolte knows the American mindset
will have to embrace the idea of using bikes for transportation, not just
for recreation and exercise.

NOLTE: We`re kind of building something for the future as biking
infrastructure improves.

GRIFFETH: New York City, which has become more bike friendly, is only city
in New York state where pedal-assisted bikes are street legal. Across the
country, regulations are murky, but Nolte, ever the transportation
specialist, is confident that that will change.

NOLTE: I don`t see it as just a small percentage of the bike market
overall. I see a percentage of just people that need to move. And,
really, that`s kind of what our tag line is. Changing the way we move.

(END VIDEOTAPE)

GRIFFETH: By the way, bike sales in Europe have been flat for more than a
decade except when it comes to electric bikes and Nolte thinks there`s a
lot of opportunity to scale up in the laws become more uniform across this
country here.

EPPERSON: Yes, a lot of people interested in just moving and you don`t
have to pedal as fast, right?

GRIFFETH: You don`t. There`s a law you can`t go faster than 20 miles per
hour and these bikes have the regulators to keep it from that, as a matter
of fact.

EPPERSON: All right. Great story.

GRIFFETH: Yes.

That`s NIGHTLY BUSINESS REPORT for tonight. I`m Bill Griffeth. Thanks for
watching and we want to remind you that this is the time of year your
public television station seeks your support.

EPPERSON: And I`m Sharon Epperson. Thank you for your support, and have a
great weekend.

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) 2016 CNBC, Inc.

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