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ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: Hiring rebounds. More Americans are working and the unemployment rate is the lowest since 2008. But there is one part of the labor market that may be cause for concern.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Get the popcorn. A new deal in the entertainment industry will create the largest movie theater chain in the world.
HERERA: Perking up. Meet the former accountants who had a bright idea to super charge your cup of coffee, and he turned it into a fast growing business.
All that and more tonight on NIGHTLY BUSINESS REPORT for Friday, March 4th.
MATHISEN: Good evening, everyone, and welcome.
The labor market in the United States is going strong. More Americans are working. Discouraged ones getting back in the game and the unemployment rate remains at an eight-year low. This morning, the Labor Department said 232,000 jobs were added in February, more than what was expected.
That, along with 4.9 percent unemployment puts the labor market at a level considered to be full employment.
But there was one big disappointment, wage growth fell, it`s first monthly decline in a year.
Hampton Pearson has the details.
(BEGIN VIDEOTAPE)
HAMPTON PEARSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Health care providers, retailers and restaurants led a robust hiring surge in February. Leading economists say the strong job market should ease Wall Street concerns a recession might be on the horizon.
DOUGLAS HOLTZ-EAKIN, AMERICAN ACTION FORUM: There is a big disconnect between the Wall Street chatter about recession and negative interest rates and all that. People are confident and current conditions has gone up in February. It was a good month for that.
PEARSON: But still, the jobs report was a mixed bag. More Americans who`ve been sitting on the sidelines came back into the jobs market last month and got hired, but wage growth decreased after a spike in January.
It`s the last jobs report before the Federal Reserve meets in two weeks.
JURRIEN TIMMER, FIDELITY: All in all, there`s something for everyone in this number, but it`s not -- it doesn`t really change the dial for the Fed over the next three months or so.
PEARSON: In February, the jobs came from retailer, hiring nearly 55,000 new workers, with restaurants and bars adding another 40,000. Offsetting those gains, the loss of more than 140,000 jobs in the energy sector just in the last 12 months.
In Washington, D.C., the business confidence has sparked a hotel construction boom. More than two dozen under construction, adding another 5,000 rooms in the next two years.
Modus Hotels is building one of the most microburst hotels here, after similar successes in New York City.
Aaron Katz is Modus president and CEO.
AARON KATZ, CEO, MODUS HOTELS: A project like this, we`ll probably hire approximately 100 people. It will be 40 to 50 in the hotel operation, 40 to 50 in the restaurant area.
PEARSON: A new concept hotel requires a new age work force. Josh Runes is the firm`s digital marking manager and one of the new hires.
JOSH RUNES, MODUS HOTELS: When are you looking for a job, you`re interviewing a company just as much as they`re interviewing you.
PEARSON: The challenge in the months ahead that generate enough consumer spending that create more hiring with higher wages, and create a kind of virtuous economic cycle, even the feds might like.
For NIGHTLY BUSINESS REPORT, I`m Hampton Pearson in Washington.
(END VIDEOTAPE)
HERERA: For more now on the jobs market, let`s bring in Gus Faucher. He`s PNC deputy chief economist.
Good to see you again, Gus. Welcome back.
GUS FAUCHER, PNC DEPUTY CHIEF ECONOMIST: Thank you, Sue.
HERERA: Let`s start, first of all, with what was Hampton mentioned, and that is the wage growth or in this particular report, anyway, the lack thereof. How worrisome is that a factor for you, if at all?
FAUCHER: You know, it`s a little worrisome, but I don`t think that`s going to be repeated. We had a nice gain in January, a half of a percent. We saw a small decline in February, a tenth of a percent. I think we will see wage growth bounce back and be stronger through the rest of 2016.
MATHISEN: So, if you even those two months out, actually, you come out ahead as Steve Liesman pointed out earlier today, but economists really across the board have been expecting, as the labor market tightens, as unemployment falls, for wage growth to kick in.
Do you expect -- this isn`t a kick-in, really, at all. Do you expect it to kick in?
FAUCHER: I think it will kick in. I mean, we see the unemployment rate moving lower. We see more people quitting their jobs in search of higher paying positions elsewhere. We see businesses competing for workers. So, I do think that the labor market is getting tighter and I do think that we will see wage growth pick up. It`s picked up a little over the past couple of years. But I think we will see growth this year and then in 2017 as well.
HERERA: So, where does this put the Fed, because we`ve also had some pretty decent other economic reports out either this week or last week. Not all of them great, but a number of them certainly were supportive. So, what does this do to the Fed`s decision on rates?
FAUCHER: Well, I think the Feds in March is going to hold steady. There is still concern about all the turmoil we`ve seen in financial markets both in the U.S. and abroad. They have some time, inflation is still below target. But as long as we continue to get numbers like today, as long as we see wage growth pick up over the next few months, which I expect, then we should see an interest hike in June, not too much, only a quarter of a percentage point and see another one probably at the end of this year.
MATHISEN: You know, any added job is a good job if you haven`t had work. But I wonder about the quality of the jobs being added. Manufacturing, I believe, was actually a job decline in the most recent months. A lot of the jobs that have been added I would say have been in services, restaurants, hotels, hospitality, and lower paying health care. Are they good income-producing jobs?
FAUCHER: We are seeing better job growth in terms of more middle wage jobs. So, at the beginning of the recovery, there was a lot of jobs at the low end. Some jobs at the high end. If the expansions continue, we see broader job base growth.
So, industries like construction, which tends to pay pretty good wages, business professional services, health services, financial services, so those jobs are being added now. I think we are seeing better job growth and kind of that middle tier jobs.
HERERA: Gus, thank you so much for your perspective. Have a great weekend.
Gus Faucher, chief deputy economist at PNC.
FAUCHER: Thank you.
HERERA: Ty?
MATHISEN: On Wall Street today, the major indexes had their first three- week win streak of the year. Whoo-hoo! The Dow reclaimed 17,000, as investors tried to make sense of that jobs report.
But by the closing bell, the blue chip Dow index rose 62 points to 17,006, its fourth straight day of gains. NASDAQ added nine, and the S&P 500 was up six.
For the week, all of the major indexes gained 2 percent or more. Nice gains there.
And it wasn`t just stocks. Commodities had a very strong week. Crude climbed 9.5 percent, its best week since August. Gold up 4 percent for the week, its first weekly gain in three. And copper ended the week up 7 percent.
HERERA: To politics now, where the race for the White House is heating up, not only for the Republicans but also the Democrats. Today, Democratic front runner Hillary Clinton sat down with John Harwood for an exclusive interview.
Hi, John.
JOHN HARWOOD, NIGHTLY BUSINESS REPORT CORRESPONDENT: Hey, Sue.
You know, we talked about the new element of her economic plan she raised and laid out today in Detroit. And that plan is targeting, like Donald Trump is targeted, companies that take jobs overseas. She says she would go to companies that move factories overseas and claw back the tax benefits they`ve gotten in prior years.
Here`s her explanation.
(BEGIN VIDEO CLIP)
HILLARY CLINTON (D), PRESIDENTIAL CANDIDATE: Oh, I don`t think what I am arguing is bad for business at all. It certainly is focused on bad behavior of some businesses. And yet, when I was a senator, I had the same position, you know, I called for raining and CEO pay. I called for closing the carried interest loophole. I called for a moratorium on mortgage foreclosures.
So, anybody who has followed my career knows that I support businesses that create jobs.
HARWOOD: Let me ask you about, quickly, about e-mail. Your Republican opponents have openly begun to suggest that you could be prosecuted. You could go to jail as a result of this issue.
When the average person out there hears -- there`s an FBI investigation and some guy who worked for her has gotten immunity for prosecution, shouldn`t they be tempted to conclude like, well, maybe -- maybe she could get prosecuted?
CLINTON: No, not at all. This is the same security review that has been going on since last spring. I`m happy that everybody now has been cooperating and giving information, because I think that will finally end this and show that only appropriate steps were taken.
So, you know, I know that, you know, the Republicans are engaged in a lot of wishful thinking, but this should not be anything people should be worried about.
(END VIDEO CLIP)
HARWOOD: Now, we went on to talk about her tax plan, her -- Tax Policy Center came out yesterday and said that the tax increases she`s proposed would discourage savings and investment. She says she disagrees with that assessment and pointed to the growth of her husband`s administration as evidence of what the nation would get if she`s elected president.
MATHISEN: Her tax plan, as I recall, John, from a segment we did last night, focuses those tax increases mostly on the highest paid people in the country. Correct?
HARWOOD: That`s right. A large majority are focused on the top 0.10 of 1 percent and the vast majority, over 90 percent over the top three-quarters of earners in the United States, Tax Policy Center says that 95 percent -- the bottom 95 percent would be virtually untouched. This is how she`s trying to distinguish herself from Bernie Sanders, because Bernie Sanders would raise taxes on a much broader swath of the population to fund programs which are more ambitious than the ones she`s proposed, and that`s the decision between the two of them.
HERERA: Did she weigh in at all on the Republicans and the infighting that seems to be going on right now in the party and between the candidates?
HARWOOD: Yes, she talked about the craziness of the Republican race both on a personal basis and also from her perspective on a policy basis. She talked about how they`re returning to trickle-down economics and pointed towards George W. Bush and the results of his last administration to say, we don`t want to go back there.
HERERA: All right, John, thank you very much. John Harwood in Detroit for us tonight.
MATHISEN: Well, the popular former president of Brazil was questioned by federal police there as part of an extensive corruption investigation. Protesters clashed with police on the streets of Sao Paulo. While Luis Inacio Lula de Silva was detained by prosecutors. They say they believe Brazil`s former head profited from a massive bid rigging and bribery scheme, that schemed billions from Petrobras. That`s the state oil company. He has denied any wrongdoing.
HERERA: Still ahead, I`ll drink to that -- an ancient craft that`s brewing up new jobs.
(MUSIC)
MATHISEN: To the business of beer. Finally, where small brewers are showing good growth despite flat sales industry wide and that, in turn, is creating thousands of new jobs. There are now more than 4,000 breweries in the United States, a number not seen since the late 1,800s. The market still isn`t saturated.
Mary Thompson tells us where the jobs are from the Half Full Brewery in Stanford, Connecticut.
(BEGIN VIDEOTAPE)
MARY THOMPSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: Only three-years- old, Half Full Brewery is going at full speed.
CONOR HORRIGAN, HALF FULL BREWERY FOUNDER: We currently brew roughly 3,000 barrels a year. We are trying to get 15,000 barrels five years from now.
THOMPSON: A goal requiring more hands, mouth and heft.
HORRIGAN: As we go for 3,000 barrels, to five to seven, to 15, we`re going to be adding roughly two or three people every step of the way.
THOMPSON: Lots of experienced workers making the steps more challenging for owner Conor Horrigan, who like others in the growing craft brew industry, wants to add seasoned workers to its current staff.
BART WATSON, BREWERS ASSOCIATION CHIEF ECONOMIST: Nationally, craft breweries are opening a rate of two a day.
THOMPSON: Small brewers typically make less than 6 billion a year, it accounts for 12 percent of the industry`s volume. Volumes seen growing to 20 percent by the year 2020, according to economist Bart Watson. He says that will mean thousands of new jobs.
WATSON: A small brewery is going to need a jack of all trades. They`re going to need somebody who is both a chemical engineer and a pork lift driver. Whereas, as you move up to a regional craft brewer, they`re going to have much more specific positions, lab technicians, you know, that chemical engineer, a head brewer.
THOMPSON: Salaries will range from mid-20s for staff at the brew pub, to six figures for brewery managers and master brewers. Demand for these workers behind San Diego State University`s decision to offer a professional certificate in the business of craft beer.
ASHLEY BENSON, SDSU STUDENT: I`m trying to get into the marketing aspect of it.
THOMPSON: A home brewer for five years, 27-year-old Ashley Benson is among the more than 600 students who have taken courses hoping to make beers their bread and butter.
GIANA RODRIGUEZ, SDSU COLLEGE OF EXTENDED STUDIES: We get the email saying we want to hire directly from your group, because we know that they can talk about beers.
THOMPSON: Students learn more than talk, though. Program director Giana Rodriguez says classes teach them how to write a business plan, get financing and run a brewery -- an ancient product giving rise to small businesses across the country, giving job seekers some things to cheer about.
For NIGHTLY BUSINESS REPORT, I`m Mary Thompson in Stanford, Connecticut.
(END VIDEOTAPE)
HERERA: A rival bid for Du Pont may be in the works and that`s where we begin tonight`s "Market Focus".
German chemical company BASF is reportedly working with advisers about a possible counteroffer for Du Pont. That`s according to Bloomberg. The report goes on to say that BASF has not made a decision on whether to proceed or not.
In December, Du Pont agreed to merge with Dow Chemical (NYSE:DOW). The news came out after the bell. And shares of Du Pont initially popped on the news, after closing the regular session up 2 percent to $63.18. Dow Chemical (NYSE:DOW) also rose slightly when the news hit after closing up more than a percent today to $50.29.
Staples (NASDAQ:SPLS) plans to close 50 more stores this year. That news comes after the office supplies retailer issued disappointing results. So much so the company`s CEO calls them under welling. Same store sales fell 5 percent and Staples (NASDAQ:SPLS) sees overall sales continuing to fall this quarter. The company also reaffirmed its commitment to acquire rival Office Depot (NYSE:ODP) despite a lawsuit from the Federal Trade Commission. Shares of Staples (NASDAQ:SPLS) fell nearly 3 percent to $9.60.
MATHISEN: Winter weather and the delayed start to the tax refund season dragged down revenue at Big Lots (NYSE:BIG). But earnings for the quarter still managed to top estimates. The company CEO said comparable store sales rose for the eighth straight quarter, despite coming in below the company`s forecast.
Big Lots (NYSE:BIG) also hiking its dividend by 11 percent to 21 cents a share. Big lots rose about 2.5 percent to $42.90.
H&R Block (NYSE:HRB) said a trend of taxpayers filing later contributed to the company`s wider than expected loss in its most recent quarter. Revenue also came in below estimates, dragged down by foreign exchange in what the CEO called a continuous fraud impact on the industry. Shares fell nearly 16 percent on the day, wow, to $27.76.
HERERA: A box office blockbuster of a different kind. Chinese-owned AMC Entertainment is now the largest movie company in the world, this after acquiring Carmike Cinemas (NASDAQ:CKEC) for more than $1 billion. Investors like that deal, sending shares of both companies higher.
Julia Boorstin takes a look at how this acquisition may change the entertainment industry`s landscape.
(BEGIN VIDEOTAPE)
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: The $1.1 billion deal subject to approval by the Department of Justice would give AMC control of about 21 percent of the U.S. green, replacing regal entertainment in the top spot nationwide.
ADAM ARON, AMC THEATERS CEO: We would think that our Carmike acquisitions should close by the end of `16. So, AMC will be perfectly positioned, 600- plus theaters, 8,000-plus screens, 250 million-plus guests buying tickets annually.
BOORSTIN: Analysts say that AMC, which was purchased in 2012 by China`s Dalian Wanda Group is making a smart deal, giving its valuable leverage with the movie studios.
CHAD BEYNON, MACQUARIE SR. ANALYST: Up until this deal, they were kind of maxed out in terms of how much leverage they had on Hollywood, but now that they`re increasing their market share from 13 percent to 20 percent, now they can go back to the studios and they`re much more important player.
BOORSTIN: In addition to that new power they`ll have in striking deals with Hollywood, AMC is expected to generate some saving from synergies, and to benefit from new graphic diversity. Carmike`s focus is on smaller markets, where different films have to play well than in big cities where AMC`s theaters are centered.
And this deal is expected to be approved by the Department of Justice because even with this acquisition, the new larger AMC would still control less than a quarter of U.S. movie screens.
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin.
(END VIDEOTAPE)
HERERA: Neither the major studios nor the Motion Picture Association of America commented on that deal.
MATHISEN: Our market monitor guest tonight says he`s investing in companies with improving businesses and attractive dividend yields. He`s Mark Luschini, chief investment strategist at Janney Montgomery Scott.
During his last appearance in June, he recommended Citi and Gilead, which are both down more than 20 percent. Those sectors have been suffering, obviously. Home construction, ETF, which is off 3 percent. The S&P 500, meanwhile, off about 4.5 percent over the same period.
Mark, welcome. Good to see you.
MARK LUSCHINI, JANNEY MONTGOMERY SCOTT: Thanks, Tyler.
MATHISEN: Some of those financials seem to be coming back. Are you comfortable with either Citi or Gilead now?
LUSCHINI: I am in both cases, Tyler. I mean, the fact of the matter is, you are right. I mean, this is a stock in the form of Citigroup (NYSE:C) that suffered along with the rest of the sectors. Pressures made interest margins as a consequence of near zero or below interest rate policies around the world continue to weigh on the prospects of the business.
That said, the stocks have been punished I think unduly. It`s trading at 0.6 of a percent against its book value, and I still think it`s a money- making enterprise, it`s well-run. It`s going to come out of it for the benefit of shareholders. So, we stayed along that.
As well as we would Gilead.
HERERA: OK.
LUSCHINI: It`s a space, health care, that`s come under fire as a consequence of a political rhetoric at the moment. But it`s still went for 7 times earnings, has a huge cash balance and we think it can be acquired and focus on R&D.
HERERA: All right. Let`s go to the stock picks for this time. We start out with P&G, Procter & Gamble (NYSE:PG). You say they`re turning around quality.
LUSCHINI: Well, it`s one of the Dow Jones companies that had a terrible 12 to 18 months, as a consequence of a bloated portfolio of products, none of which were hitting on all cylinders. And that new management has come in. They`re trying to decentralized the product management cycle, as well as eliminate a lot of products that weren`t core to Procter & Gamble`s long- term businesses.
In the meantime, in a space consumer staples that is pretty richly valued, Procter and Gamble is relatively cheap, coupled with the fact of the 3 percent dividend yield.
MATHISEN: All right. Let`s go quickly to Eaton (NYSE:ETN). Give me about 15 seconds on Eaton (NYSE:ETN).
LUSCHINI: Great industrial franchise, once again, in the top sector that`s rebounding smartly in the ricochet rally we had and as well another stock that has over a 3 percent dividend yield and I think prospects on the back of investors realizing that their global economies are not about to collapse.
HERERA: And AT&T (NYSE:T), you say is a cheap valuation and they have pricing power.
LUSCHINI: It`s one of the few industries that`s exactly realizing pricing power, which is obviously good for profitability over a 5 percent dividend yield and at 12 or 13 times multiples in the market after the sellout still trading about 15, 16 times forward. I think those are compelling characteristics.
MATHISEN: Let me ask you yes or no. Is this stock market rally sustainable?
LUSCHINI: Near term, no. I think longer term, towards the end of the year, yes, most definitely.
MATHISEN: All right. Mark, thanks.
Have a great weekend, sir.
LUSCHINI: Thanks, Tyler.
MATHISEN: Good as always to see you. Mark Luschini with Janney Montgomery Scott.
Coming up, meet the entrepreneur who had a wish -- a death wish, actually - - and turned it into a supercharged highly caffeinated business.
(MUSIC)
HERERA: And here`s a look at what to watch next week. On Monday, the markets will get their first chance to react to China`s National People`s Congress. The annual meeting where top officials will outline economic reform plans.
On Tuesday, Chevron (NYSE:CVX) hosts its analyst day. On Thursday, the European Central Banks meet t. Markets will be looking for potential new easing measures. And that`s what to watch for next week.
MATHISEN: One of the rules of entrepreneurship is to listen to your customers. Even if they`re in customers in a coffee shop, asking you for the strongest cup of coffee you can make.
A little bit of marketing genius never hurts either. And that`s just what happened when one entrepreneur in New York got the bright idea to give his ultra strong coffee a catchy name.
(BEGIN VIDEOTAPE)
MATHISEN: Mike Brown didn`t even drink coffee until he realized that caffeine rush was the only way to make it through his afternoons, working as an accountant in the New York state comptroller`s office in Albany.
MIKE BROWN, DEATH WISH COFFEE FOUNDER & CEO: I`d eat my lunch, have come up, get to my desk, and I`d almost fall asleep. So, it wasn`t for me.
MATHISEN: So he quit and began happening out in coffee shops. In 2007, he bought one in Saratoga Springs. But lattes and cappucinos prove to be a losing proposition.
BROWN: I lost a lot of money. I ended up having to sell my house, I borrowed some money for my mom to meet payroll.
MATHISEN: In his late twenties, having moved in with his mom, Brown wondered what else he could do as he tinkered with the coffee blend, aiming to satisfy customers looking for the deepest, darkest, cup of coffee they could buy.
BROWN: I came up with this really strong coffee blend and I didn`t know what to call it initially.
MATHISEN: Brown discovered Robusta beans from India at a trade show. For decades, coffee aficionados preferred more expensive Arabica beans, but lower costs and higher caffeine contain made Robusta, often used to make espresso, a blend this struggling entrepreneur couldn`t resist.
In 2012, he began selling online, even before he found a name. And then he saw one of those cup holders that keep drinks warm and cold.
BROWN: There`s a picture of a dog on it and it said "death wish" under the dog. And I -- I was like, wow, that`d be the perfect name for this coffee.
MATHISEN: Until then, Mike Brown`s coffee fashion might have seemed like a death wish. With the right label, it`s anything but.
BROWN: Last year, we did about a little over $6 million in revenue.
MATHISEN: At just under $20 bucks for a pound, Brown`s beans aren`t cheap. How else to price a coffee bold enough to call itself the world`s strongest.
Brown says that claim is based on the flavor, though he doesn`t argue with reports that a cup of death wish has more than doubled the caffeine found in a cup of Starbucks (NASDAQ:SBUX).
UNIDENTIFIED FEMALE: Congratulations!
BROWN: That`s for real?
(CHEERS)
MATHISEN: Last fall, Death Wish won Intuit (NASDAQ:INTU) small business big gain contest. Voting on social media earned Death Wish the grand prize, a free commercial during the Super Bowl, a $5 million value.
(TV COMMERCIAL)
MATHISEN: In the spot, a Viking ship powered through stormy seas, a scene Brown admits might have been out of field for some.
BROWN: As the boats, you know, going to its demise over the waterfall. It pans out, you see this guy at his kitchen counter drinking a cup of Death Wish coffee, and he`s heading to work and he`s going off into battle himself to a daily job.
MATHISEN: During the game, at an Intuit (NASDAQ:INTU) viewing party in San Francisco, Brown nervously watched his website handled 140,000 visitors at once. Sales hit a monthly record in February.
Brown`s staff, which numbered six a year ago, is now 13. And Mike says national retailers are calling, looking to stuff Death Wish. Brown says, it will happen, but for now, it`s all online all the time.
BROWN: It`s not my comfort zone. It`s not our business model exactly. I just need to find the right partner to move in there with.
(END VIDEOTAPE)
MATHISEN: The home of Death Wish.
All right. Some day in the not too distant future, we will find out which national retailer will get a shot at fulfilling its own Death Wish with Mike`s coffee. Mike Brown says he is confident his supply chain can handle the sudden ramp-up that that deal will require.
You saw him roasting coffee beans at their warehouse. But they are also talking to some of the biggest roasters in New York state. An interesting good story, good for him.
HERERA: What a great story.
MATHISEN: Good for him.
HERERA: Yes, absolutely. Continued good luck.
MATHISEN: Yes.
HERERA: Super Bowl ad.
All right. That does it for NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herrera. Thanks for joining us.
MATHISEN: And for me as well. I`m Tyler Mathisen. Have a great weekend, everybody. And we`ll see you on Monday.
END
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