tv Nightly Business Report PBS May 5, 2017 4:59pm-5:29pm PDT
>> announcer: this is "nightly business report" with tyler mathisen and sue her you're hired. job gains more than double from last month as the unemployment rate falls to a decade low. i don't value ibm the same way that i did six years ago when i started buying it. >> big blue's big bruise. warren buffett dumps a third of his ibm shares. should you? repurpose for a purpose. meet the sisters who are part of the military. now they're giving back. those stories and more for "nightly business report" for friday, may 5th. good evening, everyone, welcome. the nasdaq and s&p 500 set
records, even as ibm shares tumble. we'll have more on that in just a moment. but we begin with jobs. the labor market hasn't looked this good in a decade. job growth recovered in april after a lousy march. most agree that the economy is getting very close to full unemployment. employers added 211,000 positions last month, more than expected. the unemployment rate dropped to 4.4%, which is a ten-year low. a broader measure of unemployment that includes discouraged and part-time workers also fell. although wages grew compared to a year ago, the federal reserve wants them to pick up even more. hampton pearson has more on the employment picture. >> reporter: from 79,000 jobs in march, more than doubling to 211,000 workers added to payroll last month. at 4.4%, the unemployment rate is the lowest in a decade. >> the real story here is the
tightness in the labor markets. it didn't really show up this month in the year over year figures. the base effects are pretty strong there. but the fed is going to pay attention here. >> reporter: there are still more than 5.5 million job openings nationwide, with a shortage in many skill professions triggering competition and higher wages, and a mini boom for job creators. the porter group, headquartered in columbia, maryland, specializes in corporate clients from new york city to the washington, dc area. a spike in business now has the firm getting 2400 new applicants per month. the median salary and benefits for those who get placed, around $85,000 a year. >> it's really a war for talent, if you will, going on right now. and people, at least from what we're seeing, a lot of people are getting even more money even than what they're qualified for. >> reporter: but the lion's share of workers are still dealing with stagnant wages.
up just 2.5% year over year to around $26 an hour, according to the labor department. in april, hiring was strongest in lower paying industries. restaurants and hotels, which added 55,000 new workers. health care was second with 37,000 workers. and a wider range of salaries. leading economists say the wages versus inflation debate will be back on the table for monetary policymakers. >> everybody is emphasizing that the fed is going up in rates, which of course they are. but they're going very slowly. there's no panic, no sense we have to clang the bells because inflation is on the horizon. >> i expect a hike in september and then in the fourth quarter, i'm looking for a balance sheet adjustment or an announcement. >> reporter: this week monetary policymakers said sluggish first quarter economic growth was likely transitory. today's hiring rebound backs up
that claim. for "nightly business report," i'm hampton pearson in washington. let's turn now to jim swanson for his perspective on today's jobs report and the stock market's response to the data. he's chief investment strategies at mfs investments. mr. swanson, welcome, good to have you with us. >> thank you. >> it seems to me the stock market performs best when the economy is growing but not overheated, inflation is a little bit but not too much, and interest rates are not too low. we seem to have that, right? >> we do. this whole business cycle, the average growth rate has been about 2%. the stock market kept going up because profits were strong. don't always equate the economy with profits over the stock market. but right now the economy is on very solid footing. >> according to my notes you say that the implication is that we
can't get all that much more growth out of this economy because there aren't as many people to employ, we're close to full employment. >> yeah, and that's the dilemma. when people talk about let's see more growth, it's very tough to get it. the two drivers of growth are the number of people willing to work and what they call productivity, how much let's say services and goods you get per hour worked. that's been falling, and we're pretty much at full employment. so don't expect the u.s. economy to rachet up in its growth level. i think that would be very disappointing if people think that. >> some of those other sort of internal measures like people who were working part-time but would rather work full-time, that's come down. one of the stubborn things that nitpickers point to is the idea that labor force participation has been relatively historically low and not moving up. my counterargument to that, and i would like to get your reaction to it, is that, i
think, is structural and represents a demographic change. in other words, baby boomers retiring, leaving and not wanting to work. >> 11,000 people in this country turn 65 every day. when we look at the numbers, 85% of them don't work. so they're dropping out of the workforce. you mentioned inflation. well, wages have a tough time going up because these are the highest paid people in the society. and they're leaving. and they're being replaced by younger workers who don't make quite as much. that limits the amount of runaway inflation that people keep talking about. two things, slower growth and not as much inflation as we've seen in the past. >> what does this mean for the market? if i'm an investor and the market has been on a very good roll, do i continue to put money to work in this market? or are you a little cautious, given the fact that you don't expect the same level of growth? >> i'm tiptoeing around this market. let me start from the viewpoint that by any measure, and we look
at a lot of them, the market is expensive. you know, it has been rising for a long time. we don't want a market that's going up faster than profits. and i think that could happen later this year. i see signs that profits could not rise as much as we're seeing now. they're very strong. but i think that will fade again. we've seen these mini cycles. and i think people should be cautious, because we're now coming up on the eighth anniversary of the business cycle. and the longest one we know of since world war ii is ten years. as you get closer to let's say the next recession, people should be more cautious and less in the stock market. >> jim, thank you very much. appreciate it. jim swanson with mfs investments. >> thanks for having me. on wall street, the s&p 500 and nasdaq closed at record highs following a rebound in oil prices. ibm shares were capped, which we'll talk about in just a second. the blue tip dow index ended the
week at 21,006. the nasdaq added 25 and the s&p 500 rose nine. for the week, the major averages were all up fractionally. more now on ibm, which saw shares fall when cnbc reported that one of its biggest investors has lost confidence in the company. berkshire hathaway chairman warren buffett sold a third of his stake, saying simply ibm hasn't performed the way he expected when he started buying shares six years ago. in an interview with becky quick, he further explained his decision. >> the earnings have been obviously disappointing. i mean, five or six years ago, i think they were earning 20 plus billion pretax. maybe it's 13 billion now. and i don't think the quality of earnings has improved. you know, it's been a period when i'm sure that it's been tougher than they thought and tougher than i thought. but i was wrong. ibm is a big, strong company, but they've got big, strong exerts too.
>> at the end of 2016, mr. buffett owned 81 million shares of big blue, making him ibm's single biggest shares holder. he started cutting his stake in the first and second quarters of this year and has since stopped selling but still owns more than 50 million shares. in trading today, ibm fell 2.5% to just about $155 a share. buffett purchased shares of ibm at an average price of roughly $170. so if mr. buffett is selling some of his ibm shares, should you be selling as well? kim forrest joins us now, welcome back, kim, nice to see you. >> thank you. >> what do you make of mr. buffett's move to sell ibm? >> it was surprising, equally surprising as the day he announced he bought the shares, because for a very long time he had said he would not buy te
technology, he didn't understand it. maybe warren didn't understand his purchase fully. i think that's why we're staying in while warren is getting out. >> why are you staying in, and what would change your time? it's been a long time, this stock has underperformed the s&p over the past six years it's up 8%, the s&p is up 90%. >> when warren bought in, a lot of the sales were going to china. there was a political change there and they became china first buyers. so a lot of those sales dried up. but there's a lot of changes that are going on, that's not the only thing. the cloud came in, big data came in. and ibm has really great clients, and by that i mean they're really big companies that depend on the systems that ibm sells them. but here's the thing. we're going to the cloud.
so a lot of spending has not been done on what ibm does. and they did some acquisitions. they are moving towards the cloud. but their clients aren't moving as fast as everybody else. plus those sales are not quite as high in margin as warren would like. so we see the future being provided a little bit by ibm or a lot by ibm to its clients. but, you know, probably not at the margins that warren wanted when he initially bought the stock. >> so it sounds like you're expecting a little bit of volatility in the stock. do you expect a management change or reshuffling? >> well, i wouldn't be surprised. part of a boss's job, and as ceo you're the big boss, is you have to explain what you're doing to a lot of people, not just the employees and clients but also your shareholders. and it looks like warren didn't
receive a message that he liked or maybe ginnie wasn't able to really get him excited about what ibm can do for its customers and then in turn for the shareholders. but either way, you know, warren's out. so maybe ginnie's out too. >> if you're not keeping your biggest shareholder happy, it can increase pressure on you. kim forrest, thank you. ahead, high stakes elections for the global market. >> reporter: i'm michelle caruso-cabrera in paris, france. voters here are choosing a president. but in the rest of europe, they see it as a referendum on the european union and the euro. more coming up on "nightly business repor
federal reserve officials said the central bank should cut its balance sheet in half. the parking lot of the st. louis fed said trimming should start in the second half of this year. >> the size of the balance sheet is larger than we would like. that's why i've been an advocate of beginning to shrink the balance sheet by ending the reinvestment policy. i think we could go down to as low as $2 trillion. >> they put that card in there so he knew who it was. there was a little confusion. the fed purchased a lot of bonds to shore up the economy. investors will watch how and when the trimming happens because it could have a similar effect to tightening interest rates. the french go to the polls this sunday to choose their next president.
it's one of the most consequential french elections in decade, because it has much wider implications for the future of europe. one candidate wants france to keep the euro. the other wants the country to abandon it. michelle caruso-cabrera reports tonight from paris. >> reporter: it's the final day of campaigning for the two french presidential candidates. emmanuel macron and marine le pen. both are working to sway voters like jean-pierre messier. how many cars are made here each day? >> 600. >> reporter: how many people lost their jobs? >> 3,000. >> reporter: he was the head of the union at this now empty citroen auto plant. in the town of amiens, whirlpool factory workers will be on
strike. both candidates visited the plant macron, who supports more integration with europe, was booed. he eased some of france's linked labor laws when he was economy minister and these workers think he will did more of the same if he becomes president. but marine le pen was cheered. she wants france to leave the european union and quit the euro. she says the whirlpool employees are victims of globalization and she wants tougher labor laws. but that's not what business owners want. >> the collection, the production of the collection, are made in france. >> reporter: she started a new fashion line four years ago. she says it's tough to be competitive in france. >> when economists look at france, they think the labor laws here are too rigid. >> yes. >> reporter: do you agree? >> yes. >> reporter: france has a strictly enforced 35 hour workweek. it's also extremely difficult to
do layoffs. worker protection taxes are the highest in europe. >> you have to be very cautious to hire people, because if you do a mistake, it is more difficult to change. >> reporter: unemployment is just one of the key issues in this election. the others, terrorism and immigration, and whether or not the euro and the european union are the cause of all three. for "nightly business report," michelle caruso-cabrera, paris, france. a drop in mall traffic hit sales at revlon. the cosmetics company posted a loss and said weak demand across all divisions in north america dented results. the company added that it remains focused on restoring brand growth domestically and expanding its presence in asia and latin america. meantime, shares down more than 23% today to $19.30. the health insurer significant in a said strong growth in its government plans
helped profit top analysts' expectations. revenue in ahead of estimates, and the company raised its outlook for the year. significant in a shares up 2% to $160.25. in a push to restructure, pierson, the world's largest provider of textbooks and education products, is cutting costs in 2019 and considering selling its u.s. business. that news sent shares higher. pipeline operator trans-canada saw earnings double as the company benefitted from a recent acquisition and higher profit in its mexico pipelines. both profit and revenue beat expectations. trans-canada shares rose nearly 3% to $46.88. a st. louis jury has ordered johnson & johnson to pay $110 million to a woman who said the company's baby powder containing talc caused her ovarian cancer. this is the largest verdict so far of the more than 2,000 accusing j&j of not warning
about the risk. shares fell to $123.51. now to our market monitor. last time he was on in november, he recommended waters, ecolab, and pepsico, all of which have risen. he's alan bond, top performing portfolio manager at the jensen quality growth fund, which is up more than 8% this year. welcome. record highs for the nasdaq and s&p today, the dow not far behind. how much higher can this market go? >> yeah, that's clearly the question. and it's obviously been a very, very strong start to the year. in many ways, really kind of a continuation of the rally we saw in the fourth quarter of last year. one trend that we have our eyes on is as we look at leadership this year, the market is being led by high quality stocks. that's a bit of a change from last year. that's a trend, stocks that we
like, stocks with consistent business models, high returns on capital, it's a trend that we support and it's been a favorable backdrop for us. >> you recommend strong emerging market growth, technology, and you're focused on aging demographics. your first pick is beck and dickinson. >> yes, they dominate the market for needles and syringes. these trades have allowed becton to produce higher returns on equity, that's a real key for us. they announced a large acquisition last week, they're going to buy a competitor, c.r. barre bard. we think it's a great strategy fit, and accelerate revenue growth by expanding their products around the world. importantly for us, both these companies consistently generate higher returns on capital and produce free cash. >> a quick thought on emerson electric, a kind of mini-ge in a
way. >> sure. emerson is a global industrial conglomerate with a broad portfolio of businesses aimed at making other businesses more efficient and streamlined. we think that's a real key for them. a big chunk of their business is exposed to energy and markets. we think that's interesting right now. we've seen stabilization in those markets, we think that positions the company well. >> and oracle enterprise software. >> oracle is one of the largest enterprise software companies in the world with a focus on database software, used by businesses to manage human resources and enterprise risk. it's a business characterized by higher customer switching costs. as we looked at recent earnings reports, we see evidence of that switch and that transition is working. we think that's very good for
the long term health of the business and will bode well for the stock. >> alan bond, thank you. bond is with the jensen quality growth fund. coming up, a powerful mission. two sisters created a line of accessories that do a lot more than just complete the outfit. the bright idea is next. the department of justice is reportedly investigating uber. according to reuters, federal investigators are looking into the ride hailing company's use of software that helped its drivers evade local officials in cities where uber was not yet approved. the probe is in its early stages but it adds to uber's recent
controversies which include sexual harassment claims, high level executive departures. two sisters live in denver. one got the idea to make fashion goods out of surplus military grade material. >> that's lined with the bdu cam mow. >> reporter: imagine helping to launch your company while on active military duty in afghistan. then again, emily makes time to make fashion. she and her sister betsy grew up in a military family. but emily, an rotc student, was in her senior year at vermont's
middle bur middlebury college in 2012 when she asked her sister about making clothing from an army tent. >> what will it look like? who is going to make it? >> reporter: within days, they began shaping a business plan. their mission, repurpose military surplus materials to create a sustainable product line, that could also sustain careers for military vets. >> i also heard about challenges around veteran unemployment. those were memorable conversations. >> reporter: betsy had already been working in e-commerce. it was their mom who stitched together the first prototype tote bag. emily had deployed to afghanistan by july 4th weekend in 2013 when their company, sword and plow, began selling three products. a tote, a rucksack, and a messenger bag. they're made in the u.s.
products have used more than 30,000 pounds of military surplus. >> anything from tents to parachutes to canvas to aircraft felt and insulation. >> this is the camouflage. the uniforms i started out wearing. >> reporter: even material used to make american flags. >> there was a lot left over. >> reporter: five of their american manufacturers are either veteran-owned or partly staffed by u.s. vets. in kentucky, army veteran and entrepreneur shana roddenberg makes their line of hammered jewelry out of 50 caliber shell casings. sword and plow supports 65 veteran employees. >> for a lot of people it is a struggle to find where they're supposed to be after they serve. >> reporter: laura kenan came on board after 11 years of active duty, including 15 months in iraq. the former army major still serves with the national guard, but since meeting emily and betsy at a white house event in
2015, she's been helping them give civilians a better understanding of the military. a gap many feel has widened over the years. >> we had a thoughtful conversation about my service in the army. >> reporter: each product, handbags, pouches, toiletry kits, camouflage travel bags, priced from $19 up to $360, has its own story. >> we just got some parachute material which i'm really excited about, being a former paratrooper. >> reporter: an added bonus, sword and plow has donated 10% of hits profits four years running to organizations that support vets. >> every business does have an impact. we think there's a way to do things right and the right way to do things. and we're really excited to be living and working at that intersection. >> in the bible, the term "hammer their swords into plowshares" refers to putting military technology to peaceful
civilian use. the company just won a $25,000 grand prize in the fedex small business grant contest. they say that will help them hire a logistics expert, anybody out there, to help with inventory management. >> i love that cool story. good for them. >> love it. that does it for us on "nightly business report." i'm sue herera. thanks for joining us. >> i'm tyler mathisen. have a great weekend. we'll see you .