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Eamon Javers, Phil LeBeau, Michelle Caruso-Cabrera, Eric Chemi>
ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Sue Herera.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Healthy hiring. Private companies added more jobs than expected last month. But will low-skilled workers be the ones to power economic growth?
SHARON EPPERSON, NIGHTLY BUSINESS REPORT ANCHOR: Lower for longer. With oil near $40 a barrel, energy companies are dealing with some familiar challenges.
MATHISEN: Listening in. Why some very big companies monitor closely what you post on social media.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Wednesday, August 3rd.
EPPERSON: Good evening, everyone. I`m Sharon Epperson, in tonight for Sue Herera.
MATHISEN: And I`m Tyler Mathisen. Welcome, everybody.
Well, the Dow snaps its seven-day losing streak. We`ve got more on that in just a moment.
But we begin tonight at the intersection of Wall Street and Main Street. That would be the job market, which has been one of the most vibrant parts, most successful parts of the economy.
Today, we learned that private firms across the country continue to create jobs at a quite healthy pace. The payroll processing firm ADP reports that private sector employers added 179,000 jobs last month and that was better than expected. The services sector ranging from retailers to shippers and small businesses led the gains. This report, of course, comes ahead of the government employment report that comes out Friday. It shows that many businesses continue to hire despite relatively sluggish economic growth.
EPPERSON: Meanwhile, a fascinating article in "The Wall Street Journal" this week says that low-skilled workers, the ones who are disappearing from the workforce because of globalization and technology, could actually be the key to saving the U.S. economy. The article cites new research from a Harvard economist who anticipates a boom, yes, a boom, in low skilled jobs.
Let`s turn now to William Lee, head of North America economics at Citi to talk more about jobs and the economy.
And, Bill, thanks for joining us.
This study from Harvard says that low skilled workers will actually rekindle economic growth to the tune of nearly 2 1/2 percent a year until 2024. Do you agree with that?
WILLIAM LEE, CITI HEAD OF NORTH AMERICA ECONOMICS: I think that`s pretty optimistic. But the key to the success of that project is how software`s designed. If software and technology is designed so people complimentary, instead of being substitutes, instead of computers replacing people, computers use more people, that`s really the key to the future growth and what`s the study is about.
MATHISEN: Yes, how does this happen? How do these low skilled workers come back into the economy and jobs that pay reasonable wages and as you say, take advantage of technology if they are low skilled workers?
LEE: The key to a low skilled worker is that there are clients out there, some of them really don`t want to computers. They want to talk to people. So, if you have a low skilled worker, but if you put them in front of a really smart terminal and someone says, I want a trip to Fiji and that terminal was able to tell that low skill workers, here are the alternate routes, here are the different prices, and this is what the choices.
Human interface can enhance productivity because the client is to be very satisfied with the result and have a great experience, and at the same time, that low skilled worker is able to do something very productive. So, it really depends upon the skill that you give the worker through your technology design, and that`s a challenge for the future.
EPPERSON: We`re specifically though talking about service-related jobs, the service sector here. Will it work to other industries as well? Or is it really just the service economy?
LEE: Just look at how protective the industrial worker is today. Yes, the industrial workers are going to have to learn some skills about how to operate these very complex machines. But once they do and that depends upon the training the firms give, once they do, they become incredibly productive.
So, you don`t need a college degree to be very productive in today`s auto plants. What you need are the skills that the auto plants can teach you. And so, what we have in the future is the challenge of being able to give people embedded skills that are relevant for the jobs that are at hand.
MATHISEN: The article in "The Wall Street Journal" ends with the very interesting quote from the Harvard economist who was the lead writer on this study that we`re dealing to, Dale Jorgenson. He says there`s quite a lot of evidence that the economy is growing faster than we think. We`ve been talking about this for some time. As to whether the government numbers actually accurately measure economic growth.
Do you think they do? Do you think the economy may in fact be growing faster than we`re measuring?
LEE: There`s an enormous amount out there. So, there`s no doubt there is much more output.
For example, we now take for granted telecom, right? We can have video calls from anywhere around the world, are we paying for that? No. A lot of these services are free. So, that stuff is not being monetized. So, we`re not -- clearly, we`re not measuring that. One of the thing that again the challenge for the future is, can we harness that technology to develop jobs, jobs that are high paying jobs, which means giving the workers skills that they don`t have through the technology and not being replaced by the technology.
EPPERSON: Fascinating discussion. I`m sure we`ll continue to discuss this with you. Bill Lee with Citi -- thanks so much.
LEE: Thanks.
EPPERSON: And we`ll have more on the job market later in the program. Find out if you live in a state where workers hate their jobs the most.
MATHISEN: On Wall Street, the Dow`s losing streak is over. Financials and energy stocks helped lift the indexes as oil prices bounce back today. By the closing bell, the blue chip Dow index was up 41 points to 18,355. NASDAQ rose 22. S&P 500 up six.
As for oil prices, they did rebound today, logging their largest daily gain in three weeks, a buck 32. The commodity was helped by a surprisingly large drawdown of gasoline stocks.
EPPERSON: Despite today`s oil price rise, the trend has been in the other direction. Domestic crude has fallen more than 15 percent in the past month and with prices hovering right around $40 a barrel once again, many energy companies are facing some familiar challenges.
Bob Pisani explains.
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BOB PISANI, NIGHTLY BUSINESS REPORT CORRESPONDENT: With oil back at $40, there`s a lot of interest focused on how oil companies are coping with oil staying lower for longer. Now, we`re getting a good sense of that, because in the last day, two large oil companies have reported, Devin Energy and Occidental Petroleum (NYSE:OXY).
Now, both avoid making predictions about where oil was going, both said that production levels were and would continue to be on the high side. Wait a minute, we have an oil glut. Why are they still producing so much oil?
Because everyone needs the cash flow. Their spending is exceeding their cash flow, so they`ve got to get production up as one way out of the problem.
Second, they`re continues to cut costs in part using better fracking technology and finally, they`re continuing to sell assets. Most companies are now force to acknowledge that many of the oil assets they bought when oil prices were a lot hire will not be profitable in the near future if oil stays in this price range. So, they`re selling it, when necessary, taking charges.
The bottom line, it`s a long and winding road. But most oil companies are continuing to slowly improve their balance sheet. They`re cutting cost, they`re paying down debt, they`re improving their technology.
One key point: many big oil companies are owned for their dividends. Occidental not only said the dividend was safe. They actually raised it slightly.
For NIGHTLY BUSINESS REPORT, I`m Bob Pisani at the New York Stock Exchange.
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MATHISEN: Now, what happens next to the entire energy sector could depend largely on who is voted into the White House.
Jackie DeAngelis has that angle of the story.
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JACKIE DEANGELIS, NIGHTLY BUSINESS REPORT CORRESPONDENT: A critical time for energy investors and many are wondering what impact each presidential would have on the energy industry. Hillary Clinton has indicated that she would focus on cleaner energy, modernize U.S. infrastructure, combat climate change. She`ll focus on alternative and give Americans a range of energy options. She says no to Keystone. She also says she wants to revitalize the coal industry, but the perception is she`s phase it out.
Donald Trump says his 100 day action plan would reduce our dependence on foreign oil, impose less restriction on drilling, less bureaucracy around energy policy. He`d say yes to Keystone and take a less harsh stance on climate regulation.
The perception is Clinton would continue more of the current administration`s policies and that her plan would be a more gradual move way from foreign oil. The read on Trump`s approach is that energy independence through more drilling might pressure prices as the industry copes with oversupply conditions.
In reality, no one`s policies will be implemented overnight, but in terms of stocks, alternatives could see a boost under Clinton. Coal miners would probably do better under Trump.
JEFF GROSSMAN, BUSINESS RESEARCH GROUP: As far as stability for oil price, I`d have to think Hillary Clinton because she`s pretty much going to have the status quo here. What would happen with Trump would be something pretty much of a wild card. We`re not sure how much we`d go up or down here, but it seems that regulations would be taken off and things could get a little haywire.
DEANGELIS: The jury is still out on the drillers. Short-term, Clinton`s plan could be more supportive of prices, though earlier this year, oil did get close to $26 a barrel. Longer term, however, Trump`s plan could be better for big oil.
For NIGHTLY BUSINESS REPORT, I`m Jackie DeAngelis.
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MATHISEN: In Washington, officials confirmed that the White House secretly arranged a delivery of $400 million in cash to Iran on the same day Iran released four American prisoners. But the White House denies it was to pay a ransom.
(BEGIN VIDEO CLIP)
JOSH EARNEST, WHITE HOUSE PRESS SECRETARY: We have not, we will not pay ransom to see the release of U.S. citizens. That`s a fact. That is our policy and is one that we have assiduously followed.
(END VIDEO CLIP)
MATHISEN: Eamon Javers joins us now from Washington.
Eamon, this is a very interesting story. What does the administration say this money was actually paying for? And why does it matter whether there was a ransom payment or not?
EAMON JAVERS, NIGHTLY BUSINESS REPORT CORRESPONDENT: Well, Tyler, the administration says that this was just an installment on $1.7 billion that the administration had agreed publicly to pay the Iranians.
That money was principal and interest of a payment that the prerevolutionary Iranian government had made to the United States back in 1979 for some arms that were never shipped because the Iranian revolution happened in between. So, that money was stranded in the United States for all these years. The Iranians wanted it back and then as part of these negotiations ongoing over the past year or so, the United States agreed to pay $1.7 billion. They say the $400 million was just the first payout of that.
Now, the reason it matters whether or not this was a ransom payment is because the United States has a strict policy of not paying ransom for hostages. The thought is, if you do that, you put a price on the head of every other American who could be taken hostage. You create a market, in essence, for hostages out there, and then everyone else is trying to negotiate up from whatever the price was that you set, Tyler.
EPPERSON: How was this payment made? I mean, there`s also been question about whether the payment was secret or not. Was it?
JAVERS: Yes, the White House says, look, this was not secret because we publicly said that the $1.7 billion was going to be paid and explained that to the American people from the White House podium. And that`s true.
This particular shipment though happened in an unmarked aircraft, according to "The Wall Street Journal" and was done in non-dollar denominations of physical cash, Swiss francs, euros and other currency shipped on pallets to Iran, because there`s no banking relationship between the United States and Iran to simply wire the money. So, all of that makes it seem a lot more murky, that this payment was being done in secret, although the White House says the overall program was well known.
MATHISEN: All right. Eamon, thank you very much.
Eamon Javers in Washington tonight.
EPPERSON: Still ahead, which athletes are most likely to land Olympic sized endorsements?
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EPPERSON: Goldman Sachs (NYSE:GS) has been ordered to pay more than $36 million to settle allegations that it obtained and used confidential regulatory materials from the Federal Reserve. The bank already paid a $50 million fine to New York state banking regulators for failing to properly supersize its former employee. The former Goldman employee was fired back in 2014. A New York Fed employee was also fired and sentenced to in court after pleading guilty to charges.
MATHISEN: Tesla reports a wider than expected loss in its second quarter. The electric carmaker lost $1.06 a share. That`s $293 million. Estimates were a meager loss relatively of 52 cents a share. Revenue for the quarter also missed estimates, coming in at roughly $1.5 billion. But that was 30 percent above last year`s level.
As for the stock, it was little moved in afterhours trading following the results, but the company also made it clear, that is, it says, making progress in increasing production.
Phil LeBeau has more on the company`s quarter.
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PHIL LEBEAU, NIGHTLY BUSINESS REPORT CORRESPONDENT: The electric car company Tesla reporting a wider than expected loss for the second quarter, but it`s the company`s outlook for the second half of this year that`s getting the most attention from investors. Tesla says it expects to deliver at least 50,000 vehicles in the third and fourth quarter combined and if that happens, Tesla should get its full year delivery guidance of at least 80,000 vehicles. Not much reaction initially after the earnings report.
Again, Tesla reporting a greater than expected loss in the second quarter.
Phil LeBeau, NIGHTLY BUSINESS REPORT, Chicago.
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EPPERSON: Stronger ad sales helped 21st Century topped earnings estimates, and that`s where we begin tonight`s "Market Focus".
The media company also showed higher affiliate revenue, but still, not enough to beat sales estimates. Fox is also hiking its annual dividend and launching a $3 billion share buyback. Shares were lower in extended hours, following the results, but ended the regular session up a percent to $27.04.
Mobile payment company Square posted a narrower than expected loss, thanks to an uptick in sellers. The revenue also was higher than expected and the company gave revenue guidance for the current quarter that was in line with estimates. Shares initially popped after-hours, adding on to the regular session`s nearly 4 percent gain. Shares closing at $10.44.
Time Warner (NYSE:TWX) posted disappointing sales as currency headwinds and lower television licensing revenue hurt results, but the media giant did top profit estimates, thanks to higher subscriptions at the company`s HBO network.
Time Warner (NYSE:TWX) also said it took a 10 percent stake in video streaming company Hulu. Shares up 2 percent to $77.83.
And Clorox`s profit fell in its latest quarter due to higher spending on marketing and production innovation, missing targets. But the consumer products company maker did post better than expected revenue and gave an upbeat earnings outlook for the year. Shares were up to $131.59.
MATHISEN: Humana`s quarterly profit fell with losses tied to its Affordable Care Act plans. Even so, those results were ahead of estimates. Revenue also better than expected. The company also reiterated that it will end the majority of its plans tied to those public exchanges next year. Shares up 2 percent at $173.48.
The shoe maker Crocs (NASDAQ:CROX) missed expectations, citing a challenging global retail environment. Croc`s guidance for the current quarter also came in below estimates and the company said revenue for the year is going to down in the low single digits. Shares plunged 23 percent to $8.44.
And Fiat Chrysler may be exploring a sale of its auto parts maker, Magneti Marelli. This according to a Bloomberg report. It says the electronics company Samsung is in advanced talks with Fiat to potentially buy some or all of the operations tied to that unit. The deal could be valued at more than $3 billion and that sent shares of Fiat Chrysler up nearly 9 percent to $6.62.
And Walmart is reportedly interested in buying jet.com. "Wall Street Journal" says a potential deal could be worth up to $3 billion. Walmart declined comment. Walmart shares off 19 cents today to $72.94.
EPPERSON: Friday marks the official kickoff to the 2016 Summer Olympics in Brazil, where more than 11,000 athletes from all over the world will come together to compete for gold, and if they`re lucky, a select few could land big endorsement deals to go along with their medals.
Dean Crutchfield, branding expert of his own firm, the Dean Crutchfield Company, now joins us to talk about this.
And, Dean, what does it really take for an athlete to be a candidate for an endorsement? Do you have to be only the number one or number two in your sport?
DEAN CRUTCHFIELD, BRANDING EXPERT: No.
EPPERSON: Number five, could they get a deal, too?
CRUTCHFIELD: Absolutely. It`s really a question of the personality and the profile and how it matches the brand. You brand is not just about marketing advertising. It`s about who you are. So, who reflects your brand the best? That doesn`t mean they`re the number one player.
MATHISEN: Do most, Dean, of the companies that might be attracted to finding an endorser, do they already know who they`re going to go after? Are the stars almost preordained?
CRUTCHFIELD: You`ve always got the talent spot as they`re looking that, you know, the bank of athletes that are playing. And there`s always those few that really stand out. I mean, I think that you know, Simone Biles or Elijah Wilson or Tom Shields, the swimmer, definite hot picks for U.S. top athletes that likely to get sponsorship deals because of the qualities they bring to the sport.
EPPERSON: What if a breakout star, someone that we really don`t know their name yet, but once we start to see the video and we see them play and they do well? They`re going to be the breakout star. What happens with the endorsements there? Are companies lining up, are they right there on site ready to sign them?
CRUTCHFIELD: Well, they`re very sophisticated. They`ve got their feelers out there. Brands love endorsements and customers love celebrities. So, it`s a very important, big part of business and a very successful aspect of marketing. So, they`re on the lookout for any talent that they can find.
MATHISEN: Anyone whose story captures the imagination I assume of the viewing public would be the people they would go after. We know some of the stars, the Michael Phelps, the swimmer, Usain Bolt, Serena Williams and so forth, but do most Olympic competitors make any money?
CRUTCHFIELD: No, no, most don`t. I think it`s the same -- if you look at a lot of trades, a lot of professions, not everybody`s making the big bucks. It`s just a small few and those small few in the States really if you think about Serena, you think about Sharapova, you know, there`s a lot of overexposure with that current talent base. So, there`s a real demand for new talent, for new standout stars to take on these brands and refresh their sense of who they are in the market.
EPPERSON: And, quickly, Dean, what about rebranding someone who may have fallen into some problems if there`s a doping scandal. If there are some other type of scandals with one of these athletes, how then do the companies recover and how do they distance themselves from the athletes?
CRUTCHFIELD: Well, basically, they say never trust an animal. It doesn`t matter how many legs it`s got. These things can go wrong and there is the morality clause, but that`s after the fact. It`s difficult to control a personality, whether they are an actor or sports person, as we`ve seen in so many cases.
EPPERSON: Thank you so much, Dean. Dean Crutchfield with the Dean Crutchfield Company.
CRUTCHFIELD: Thank you.
MATHISEN: Coming up, you can run, but you can`t hide, at least not on social media. And now, some very big companies are listening in to your online conversations. Not kidding.
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MATHISEN: Next time you`re at a restaurant or even a ball game on vacation, the company that owns the venue you are patronizing may be monitoring your public social media posts, not your e-mails or texts, but your non-private Facebook (NASDAQ:FB) or Instagram or Twitter posts.
The growing use of a technology called geo-fencing is making it easier. Much easier for companies, including some of the world`s biggest, to see what their customers are talking in real time while they`re on property. The goal is to engage with them, increase awareness of their brand and hopefully boost sales.
Michelle Caruso-Cabrera has our story.
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MICHELLE CARUSO-CABRERA, NIGHTLY BUSINESS REPORT CORRESPONDENT: At Marriott`s corporate headquarters in Maryland, they call this glass- enclosed room M Live. It`s a modern day command center for the hotel chain where employees constantly monitor social media platform such as Instagram, Twitter, Facebook (NASDAQ:FB) and YouTube.
Every day, more than 300,000 guests post on social media from a Marriott property. Executives know this because of a technology called geo-fencing.
KARIN TIMPONE, MARRIOTT GLOBAL MARKETING OFFICER: (INAUDIBLE) a hotel or a location.
CARUSO-CABRERA: Marriott has geo-fenced more than 4,000 properties worldwide.
TIMPONE: That means basically, in the area around the hotel, the conversations that are on social media, we can tell who`s geographically around that hotel.
CARUSO-CABRERA: And they watch as guests post about everything from breakfast in bed in Amsterdam, to pool selfies in the Caribbean. Sometimes, Marriott reposts them using their account, and sometimes, they reach out to the customers directly.
So, when guests post about a special occasion, for example, like a birthday or an engagement, the team here can notify the manager of the hotel and that guest can get a special something, like bottle of champagne or perhaps a free appetizer at dinner. Maybe a room upgrade.
It`s designed to make the customer feel special, not spied on.
The idea that you can see what people are posting within a geographic area, do you worry that that creeps out your customers?
TIMPONE: We think that the people who are actually on social media are delighted at the ability to have us amplified their conversation.
CARUSO-CABRERA: The CEO of the company behind this platform, HYP3R, says investors frequently asked about privacy concerns, he`s quick with a response.
CARLOS GARCIA, HYP3R INC CEO: Our partners are only engaging and interacting with people that have shared their content publicly. Marriotts are using HYP3R to surprise on delighted guests. Not to try to sale them something but to try to alleviate their experience.
TIMPONE: It`s really about a personal relationship that we`re having with our customer.
CARUSO-CABRERA: For NIGHTLY BUSINESS REPORT, I`m Michelle Caruso-Cabrera, Bethesda, Maryland.
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MATHISEN: And if you don`t like that, you can turn off "location services on your phone".
To read more about how your social media posts are being watched by some Fortune 500 companies, head to our website, NBR.com.
EPPERSON: Here`s another way that you`re being tracked. You may want to know what you think about your job and a lot of people want to determine where people are most miserable and where they`re most happy. Well, Eric is with us and he has done some research. There`s some findings out there where people are most happy about their jobs.
What have you found?
ERIC CHEMI, NIGHTLY BUSINESS REPORT CORRESPONDENT: It`s really interesting research, so I like to look at the bottom of the list. Where are people the most unhappy? Where do they hate their job the most?
And Delaware is number one on the list. They`re a small state. Number two is Connecticut. They are a major metropolitan place. You think about the big companies out of there, there`s the entire list. The bottom list, Florida, Louisiana, Maryland.
So, a lot of East Coast states there, talking about on social media, how they don`t like their jobs.
MATHISEN: What`s the matter with Connecticut and Delaware?
CHEMI: Connecticut --
MATHISEN: Connecticut has a high personal income.
CHEMI: Connecticut, high taxes. Think about GE. They`re leaving the state to go to Massachusetts. ESPN, big layoffs, finance people, hedge funds, Wall Street people not getting kind of bonuses they`re used to. Salaries are going down, layoffs happening there.
So, Connecticut`s got a lot of things going against it.
MATHISEN: What`s wrong with Delaware? Delaware`s so little.
CHEMI: Small states with skew one way or the other. Because they`re small, it`s really easy to move the needle. You won`t see big states on the extremes. But that`s what makes Connecticut so interesting.
EPPERSON: What are they looking at when they determine what`s job happiness? What does that really mean? What are the trends out there?
CHEMI: Monster.com and brainwash, they track social media. They`re looking at how people are behaving on social media. What are they saying?
They look at words like hate, love, like, all that kind of stuff. Very sophisticated to see what people are saying. They know where they live. Kind of figure out.
EPPERSON: I would say I hate my job somewhere.
CHEMI: Somewhere, like maybe one of you might have a bad day and say not a great day at work today. That`s going to get picked up on tweet, and they`re going to put this in the data.
MATHISEN: Happy they have a job. Just kidding.
Where are workers happiest? Which states?
