<Show: NIGHTLY BUSINESS REPORT>

<Date: March 8, 2013>

<Time: 18:30:00>

<Tran: 030801cb.118>

<Type: SHOW>

<Head: NIGHTLY BUSINESS REPORT for March 8, 2013, PBS>

<Sect: News; Domestic>

<Byline: Susie Gharib, Tyler Mathisen, Steve Liesman, Diana Olick, Brian

Shactman>

<Guest: Alan Krueger, Bill Gross, Kevin Caron>

<Spec: Business; Employment and Unemployment; Labor; Dow Jones Industrial Average; Stock Markets; Federal Reserve; Policies; Economy>

<Time: 18:30:00>

ANNOUNCER: This is NIGHTLY BUSINESS REPORT with Tyler Mathisen and Susie Gharib.

TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: Ramping up -- employers add 236,000 jobs in February, pushing unemployment to a four-year low and vaulting the Dow to another all-time high.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: The Fed`s next move?

Bill Gross, manager of the world`s biggest bond fund, weighs in.

MATHISEN: And the American recovery, four challenges that could unleash prosperity or imperil.

Good evening, everyone. And welcome to our public television viewers.

Susie, today, another historic day -- all about jobs.

GHARIB: And it was a welcome surprise in those jobs numbers and as a result, the unemployment rate standing at 7.7 percent tonight the lowest in more than four years. American businesses added 236,000 new jobs in February, cutting across all sectors of the economy, and that burst in hiring inspired investors.

Stocks were up again today, making this a week of records for the Dow Jones Industrial Average. The Dow rose 67 points closing at 14,397, another record high.

The NASDAQ added 12, the S&P edged up seven points. And this is the tenth straight Friday of the year that the major market averages were up.

So where are the new jobs? What sectors are still seeing weakness?

And what`s the role of the Federal Reserve in the labor market?

Steve Liesman has our report.

(BEGIN VIDEOTAPE)

STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): A solid jobs report renewing hopes that the U.S. economy could be chugging along just fast enough to put Americans back to work.

(on camera): Economists are encouraged by this report but they`re concerned that the strength may not last. That`s why Goldman Sachs

(NYSE:GS) economist Jan Hatzius says the Federal Reserve is unlikely to change its easing monetary policy from this report alone.

JAN HATZIUS, GOLDMAN SACHS CHIEF ECONOMIST: The question I think is more how many times months do you have to see to be convinced that that is actually the underlying trend of job growth. I mean, if you have a long period at this kind of pace, of course, they would -- they would make some changes. But really how sustainable is it and how are we going to be looking at this three or six months down the road?

LIESMAN (voice-over): There were gains in construction and manufacturing jobs. The service sector with retail education and health care leading the way, added 179,000 jobs.

But government employment dropped by 10,000. That could be a sign of things to come as the sequester spending cuts hit.

Overall, it`s the third month in a row that job gains were above 200,000, but it brought back memories of last year when strong wintertime hiring only brought about a springtime swoon.

For NIGHTLY BUSINESS REPORT, Steve Liesman.

(END VIDEOTAPE)

MATHISEN: That surprisingly good news about jobs is good news for all of us. But is the turnaround taking place fast enough?

I spoke with the chairman of the president`s Council of Economic Advisers, Alan Krueger, about what more needs to happen.

(BEGIN VIDEOTAPE)

ALAN KRUEGER, COUNCIL OF ECONOMIC ADVISERS CHAIRMAN: I think today`s report and other indicators that have been coming in on unemployment insurance claims and car sales suggest that the recovery is gaining traction. We`ve had three years where we`ve added 6.4 million private sector jobs over the last five months, four of the last five months, over

200,000 jobs have been added. Importantly, the construction sector has been adding jobs.

But there`s much more work that needs to be done. Too many people are unemployed, middle class families are under stress even before the recession hit, so the president remains focused on strengthening the recovery and making sure that we build on the progress that we`ve seen so far.

MATHISEN: Granting that there is still a relatively higher than normal unemployment especially among minorities and especially among the youth, do these numbers suggest, however, that the economy is better able today to stand on its own two feet without the help of monetary or fiscal stimulus? And is it better able today to withstand the federal budget cuts or spending cuts that are in the pipeline?

KRUEGER: Well, the economy has been healing. You know, we have been seeing a lot of recovery take place in the housing markets. We`ve worked off a lot of the excess homes that were built, and we have been overcoming some of the head winds that we faced, including cutbacks that already have been in place because of the phasing out of the Recovery Act.

Regarding the sequester, I think just about all economists who have looked at it, say it`s bad policy. It imposes a set of indiscriminate cuts, will slow economic growth and job creation, the Congressional Budget Office predicts it will reduce GDP growth by 6/10 of a percent and lower employment by 750,000 jobs, compared to where it otherwise would be, and it doesn`t solve our long run problem. It does nothing to address the long run drivers of our deficit problems, which are health care costs for an aging population.

MATHISEN: So does the economy need more stimulus, more monetary help?

KRUEGER: As a general matter, I don`t comment on monetary policy. I leave that that to the Federal Reserve, which is an independent agency.

But what we need is smart fiscal policy. I think what the economy would benefit from most is what the president has proposed, which is reducing our deficits in a balanced way.

What the president proposed is that we raise additional revenue by closing tax loopholes which distort the economy, that we reform entitlements so that they are there for future generations, and that we make smart spending cuts while we support investment in things like infrastructure today, where we still have tremendous need to improve our infrastructure, put more construction workers back to work right now and raise our competitiveness in the future so our businesses can do better going forward.

MATHISEN: Dr. Alan Krueger, thank you very much for joining us.

KRUEGER: Thanks for having me, Tyler.

(END VIDEOTAPE)

GHARIB: Now, the housing boom has created more than 150,000 new construction jobs just in September, but it`s still not enough in housing as builders struggle to hire enough qualified workers.

Diana Olick has the story.

(BEGIN VIDEOTAPE)

DIANA OLICK, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over): For the nation`s home builders, there are finally signs of life again.

Construction is coming back.

Unfortunately, skilled construction workers are not.

LISA MARQUIS JACKSON, JOHN BURNS REAL ESTATE CONSULTING: They got burned during the downturn and so the appeal of running back to an industry that burned them a few years ago is not there.

OLICK: The nation did add 17,000 new residential specialty trade jobs in February, according to today`s jobs report. That`s plumbers, electricians and roofers but that`s not enough. Housing starts are up 24 percent from a year ago but these jobs are up just 3 percent.

At Foxhall Homes in Silver Spring, Maryland, demand is coming back.

But the business has clearly changed.

MICHAEL VILLA, FOXHALL HOMES PRESIDENT: Yesterday, we had a builder come into the site here who was looking for some subcontractors. And that`s kind of unusual. It never happens.

OLICK: The situation is worst out West, where builders are raising prices in order to be able to pay for wages.

Meanwhile, the delays are growing. Nationally, it is taking 15 percent longer to complete a home than it did a year ago, according to John Burns Real Estate Consulting.

(on camera): So why were the nation`s builders so caught off guard by the housing recovery? Why weren`t they more prepared with workers ready to go?

Well, after this historic housing crash, many of them just didn`t believe recovery was real.

VILLA: We learned a lot through the recession and it`s important not to go out on a limb, you know, unless you really have some concrete information that it`s going to work out for you.

OLICK (voice-over): Better safe than sorry -- unfortunately may have home builders and buyers paying the price.

For NIGHTLY BUSINESS REPORT, I`m Diana Olick in Silver Spring, Maryland.

(END VIDEOTAPE)

GHARIB: Our next guest just raised his economic forecast today and now expects the economy will grow at a robust 3 percent this year.

Bill Gross is the founder and co-chief investment officer of PIMCO.

That`s the world`s biggest bond fund.

Bill, thanks for joining us.

BILL GROSS, PIMCO CO-CIO AND FOUNDER: Thanks, Susie.

GHARIB: You know that is -- hi. That`s a dramatic forecast. What`s changed?

You were just a short while ago expecting 1 percent, 1.5 percent growth for this year. Now, 3 percent. Is it today`s jobs report?

Something else?

GROSS: Well, I think that helps, Susie. To be fair we expect 1.5 percent to 2 percent for the first quarter, in the first half. It`s in the second half when housing starts begin to improve even from current levels and when the sequester and fiscal drag as economists call it begins to lessen.

And so, it`s a second half that has the 3 percent potential. But for the year, in total, you know, probably 2 percent as a whole.

MATHISEN: Bill, nice to see you.

You`ve been a little bit uncomfortable, to put it charitably, with respect to the Feds` policy. How, if at all, do today`s jobs number, in your view, change what the Fed will do with respect to interest rates and the bond purchasing? Or what it ought to do?

GROSS: I don`t think it changes it much, Tyler, to be fair. You know, all markets are moving based on Central Bank check writing. The Fed is writing $1 trillion worth of checks in this particular year, if they continue their program. Will today`s employment report change that forecast? I don`t think so.

The chairman and Janet Yellen and others have been pretty focal in terms of the continuation of certainly the policy rate, the Fed funds rate at 25 basis points and continuation of the bond buying program, the mortgage buying program.

So, I don`t think it changes it. They`re looking at a target of 6.5 percent unemployment. We`re at, you know, 7.7. So we`ve got a long ways to go.

GHARIB: Bill, let me ask you about stocks versus bonds. Everybody`s been telling investors, time to switch out the bonds and go into stocks.

And I know you run this big bond fund. But do you agree with that strategy? And if people do do that, what happens to bond prices?

GROSS: Well, I think that all asset prices aren`t officially elevated. Let`s be fair that the treasuries, the five-year treasury at 90 basis points which means 0.9 percent, you know, certainly low in yield and high in price, to a certain extent that flows through to other assets such as stocks and high yield bonds and so on.

So we have an artificiality to all asset prices. I would say that bonds are not in a bear market. They`ve certainly gone up in yield over the past few weeks and down in price.

But this is really a market of bonds as opposed to a bond market, Susie, and so -- and a student manager, hopefully PIMCO is in that category, can pick bonds in Mexico and Brazil and, you know, perhaps even Italy and Spain, where yields are going down and prices up as opposed to vice versa.

MATHISEN: You know, Bill, in your always interesting letter to shareholders or to investors, this month, you write about irrational exuberance.

GROSS: Yes.

MATHISEN: And you say that on a scale of one to 10, asset prices are right now about a six on the irrational exuberance scale.

What does that mean in terms of what investors should do with their money or what should they expect in terms of returns from their money?

GROSS: Thank you, that`s a good question.

I think what it means in terms of what they should expect is a return from bonds of perhaps 3 percent, 4 percent, or return from stocks of perhaps 6 percent to 7 percent. It simply means a rational temperance as opposed to irrational exuberance, which was the phrase in 1996, all the way back to Chairman Greenspan when he asked the question.

I said we`re at a six on a scale of one to 10 in terms of exuberance.

That simply means that as stock prices move higher and that risk spreads are compressed in terms of bond markets, that we should begin to be cautious. Don`t look for an exit but temper your enthusiasm with lower expectations and then perhaps a more diversified and lower risk portfolio.

GHARIB: Bill, we know we can always count on an exuberant conversation with you. Thank you so much. Have a great weekend.

GROSS: Thank you both.

GHARIB: Bill Gross, founder and co-investment officer of PIMCO.

MATHISEN: And this week in our special "In Focus" series, the American recovery, we`ve examined where the economy is growing and where headwinds remain. In tonight`s final installment on this day of very positive news about jobs, we shift to the bigger picture and explore what the long-term obstacles are to America`s economic primacy and prosperity.

"In Focus" on this jobs Friday, the American recovery and the challenges we face.

(BEGIN VIDEOTAPE)

MATHISEN (voice-over): Challenge number one: health care. We will spend $2.8 trillion on it this year, that`s about one out of every $6 the U.S. economy will generate. We pay more for health care than the next 10 biggest spenders combined, and we don`t get better results. We have higher rates of disease and injury of every age up to 75 and shorter life spans than any of 17 other wealthy nations.

We rank 50th in the world in infant mortality. According to "Time"

magazine, Cuba is number 41.

PAUL KRUGMAN, NOBEL PRIZE-WINNING ECONOMIST: We have to do something about health care costs, that which is what the main driver of stuff. But that doesn`t really mean cutting benefits, that means cutting costs.

MATHISEN: Bottom line: even though health care creates jobs an expected 5.5 million this decade, what we spend on it is a weight on our economy and our future prosperity.

Challenge number two: America`s infrastructure -- roads, bridges, water system, transit, the electric grid, all outdated or crumbling, or both, and it`s costing. According to the World Economic Forum, the U.S.

ranks 25th in overall infrastructure, behind Barbados and Oman and one spot ahead of Qatar.

PATRICK NATALE, AMERICAN SOCIETY OF CIVIL ENGINEERS: We`re going to lose 3.5 million jobs.

MATHISEN: Pat Natale heads up the American Society of Civil Engineers.

NATALE: We`re looking at a $3,100 negative impact on your pocketbook.

MATHISEN: Natale`s group which admittedly has a vested interest in infrastructure spending, says that by 2020, the U.S. could lose almost $1 trillion a year in commerce, unless we invest more in our physical plant.

Case in point, he says --

NATALE: We lose about 6 billion gallons of good clean drinking water out of our system every day.

MATHISEN: Bottom line: the U.S. spends 2 percent of GDP on infrastructure, half what it did 50 years ago. Europe spends 5 percent, China, 9 percent.

That`s a competitive risk, which brings us to challenge number three:

global competitiveness. We`re number seven now, down two spots in the World Economic Forum`s latest ranking. It`s the fourth year in a row the U.S. has slipped.

High labor costs are hurting. Damaging, too, is a complex tax code, regulation, and a political system that critics say is dysfunctional.

But perhaps most troubling of all, we`re shortchanging research and development. U.S. R&D spending grew just 3 percent as a share of GDP from

1987 to 2008. Meanwhile, China`s rose 110 percent, Korea`s 91 percent.

In part that lack of investment has left America with a skills gap, and that leads to challenge number four: education. We spent $810 billion a year on it for primary and secondary schooling alone, close to $8,000 per school-aged child, far more than any other developed country. Yet, American students ranked 17th in science, 25th in math, out of 34 industrialized nations. Of the 1.6 million bachelor`s degrees awarded in 2009, only about 6 percent were in engineering, half the average for rich countries. Only 15,000 degrees were in math, that`s half as many as were awarded in parks, recreation, leisure and fitness studies, which is nothing against parks and recreation, but which does show the education challenge we face.

(END VIDEOTAPE)

MATHISEN: You know, Susie, challenges -- really, the other side of challenges are opportunities and there`s a lot of opportunities. We`ve got a lot of things going for us. The deepest best capital markets in the world. We also have the most flexible labor markets in the world and an amazing gift for reinvention.

GHARIB: And innovation -- we are a country of entrepreneurs.

MATHISEN: We are leaders there.

GHARIB: Don`t count out the U.S.

MATHISEN: But these are the headwinds. These are the head winds.

GHARIB: All right. Really nice piece, Tyler.

Well, coming up where to put your money right now, a top strategist gives his stock picks.

But, first, let`s look at some of the closing numbers from markets around the globe.

(MUSIC)

MATHISEN: "Market Focus" now.

What a week on Wall Street -- nine of the 10 S&P sectors gained today.

And let`s take a quick look at all of them.

Consumer discretionary leading the way, up more than 1 percent -- materials, utilities, all the way down to health care, all of them higher on this Friday. And at McDonald`s (NYSE:MCD), not enough customers though were biting at the Fish McBites it appears.

Sales in the U.S. fell 3.3 percent last month but the sales drop-off was not as bad as analysts feared, especially considering the payroll tax increase and rise in gas prices, among other factors.

Now, in total, global sales were off just 1.5 percent. And as a result, shares of McDonald`s (NYSE:MCD) were up for the day and for the week.

A jury in Los Angeles ordered Johnson & Johnson (NYSE:JNJ) to pay more than $8 million to a plaintiff claiming injury from a defective metal hip implant that was later recalled. It is the first verdict in more than

10,000 cases brought against J&J`s DePuy unit over these implants.

J&J, a Dow component, ended the day up, over $79 -- finishing at

$78.19 actually.

Zimmer Holdings (NYSE:ZMH), the medical device maker, up its dividend

11 percent today. Zimmer CEO also pointed to new products launch in its orthopedic reconstructive devices. Shares there up slightly, $75.40, and up more than 23 percent over the past year.

GHARIB: Our market monitor is bullish on the markets and not just because of those new records this week, but he`s been pretty positive since last September.

Let`s bring in Kevin Caron, market strategist at Stifel.

Hi, Kevin.

KEVIN CARON, STIFEL MARKET STRATEGIST: Hi. Good to be here.

GHARIB: You know, it`s really nice to see all of these milestones on the Dow, but you know, a lot of investors are nervous about investing in this market. So make a case about why the individual investor should start looking about putting stocks in their portfolios.

CARON: Well, it`s our view that fundamentals have been improving and are continuing to improve and that valuations for equities overall are relatively reasonable. So what we`re looking to do is continue along a path that we began last fall, overweighting equities in portfolios, and focusing on the highest quality stocks that can provide us what we think is a reasonable rate of return.

Bill Gross has talked about a 6 percent or 7 percent kind of return for equities and I think that investors should be looking for those kind of returns from the most consistent kind of companies out there. And I think there are names in there that can benefit from an improving economy.

GHARIB: All right. Let`s talk about some of the high quality stocks you were just mentioning.

First on your list is Norfolk Southern (NYSE:SO). This is NSC on the NYSE. Tell us why you like this stock.

CARON: Well, it`s not getting any easier to move goods around the United States. We have after all a rising amount of exports coming out of the United States. Exports have doubled over the last 15 years, same with imports. These things need to get to and from ports and places of business.

Roadways are getting more congested all the time and railway companies such as the Norfolk Southern (NYSE:SO) have the ability to provide the lowest cost transportation for those goods. So it`s a natural in an environment where capacity is constrained. We like it. We think the stock can trade easily into the mid-80s.

GHARIB: Oh, OK. Let`s move along to Walmart, which is another one of your picks, and you liked WMT. Even given that consumers are feeling a little bit like penny pinchers these days?

CARON: Exactly. In fact, the fact that Walmart is in a market that caters to the consumers who have tight budgets, we know that employment is increasing. We saw those numbers today.

But when you look at underlying wage growth, it`s positive but very meager. So we want to look for companies like Walmart that cater to that.

I think they were a little slow in executing coming out of the recession.

Many of the other dollar stores took away market share, but I think they`re executing better now and have tremendous clout in the global market to provide customers who are value-oriented with a needed product and service.

GHARIB: All right. Microsoft (NASDAQ:MSFT) is another one of your picks, MSFT. It`s been having a lot of issues with its surface tablets, smartphones, even its Windows 8 operating systems. Why do you like it?

CARON: Well, nothing ventured, nothing gained. Microsoft

(NASDAQ:MSFT) has been looking for a new product for quite a while and it`s reflected in the stock price. If you subtract the debt, they do have about

$7 of -- excuses me -- cash on the balance sheet, you`re looking at a company trading seven times earnings stripping out the cash.

So, ultimately, if something positive does happen in terms of tablets or perhaps mobile, this is a company that has a lot of upside --

GHARIB: OK.

CARON: -- and a very good dividend to boot.

GHARIB: All right. A lot of good information. We have to leave it there. Thanks a lot, Kevin.

CARON: Thanks for having me.

GHARIB: Do you have any disclosures to make?

GHARIB: Stifel does make a market in these securities.

GHARIB: All right. Kevin Caron of Stifel.

And now, let`s take a look at what`s on our radar for next week.

(BEGIN VIDEO CLIP)

GHARIB (voice-over): On Monday, the Treasury will update investors on the sale of its stake in General Motors (NYSE:GM).

Tuesday, we`ll get a monthly check on how small business owners see things. Will hiring pick up?

And no more "Big Gulp" in New York City, as the ban on big sugary drinks kicks in. Other cities will be watching.

And then on Friday, a Senate investigative committee will hear from JPMorgan (NYSE:JPM) execs on what they knew and when about the risks in the London whale trade.

That`s all ahead next week on NIGHTLY BUSINESS REPORT.

(END VIDEO CLIP)

MATHISEN: Don`t forget. Daylight Savings Time on Sunday and the official start of spring is now just 12 days away. And that means baseball is right around the corner.

But Major League games are expensive. And in a tepid economy, it`s sometimes tough to fill seats. At spring training, Brian Shactman found out what some teams are doing to make baseball a little easier.

(BEGIN VIDEOTAPE)

BRIAN SHACTMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT (voice-over):

Baseball season, it means springtime and it also means time for fans to save some money if they want to go to a game.

UNIDENTIFIED MALE: But Yankee stadium or some of the other big stadiums, I don`t see much of a value there anymore.

SHACTMAN: To treat four people to a Yankee game last year costs an average of $324 according to team marketing report. The league average, over $200.

But not every ball park costs that much, especially in this post- recession economy. Cleveland`s slashed concession prices and now has the cheapest beer in baseball, $4.

(on camera): There seems to be a renewed focus on the fan. Of course, you need a good product on the field. But if the experience is not good in the stands, fans will not pay to come back.

ARTE MORENO, L.A. ANGELS OWNER: If it`s so unaffordable to come to a ball game, then they`re going somewhere else.

SHACTMAN (voice-over): L.A. Angels owner Arte Moreno didn`t need a recession to make changes. His first move when he bought the team for $180 million in 2003 was to cut beer prices almost in half.

MORENO: For 10 years, I`ve never moved that price.

SHACTMAN: Then, he went after the underage crowd.

MORENO: When we came in, I said, I`m going to start marking 5 and 6 and 7-year-olds and they thought they were nuts. Well, if 10 years ago, there are 17, 18, 19-year-old kids now. And, you know, they`re buying tickets.

SHACTMAN: To Moreno, it`s not just good value, it`s good business.

For NIGHTLY BUSINESS REPORT, Brian Shactman, Phoenix, Arizona.

(END VIDEOTAPE)

GHARIB: No matter what, you somehow find some money to go to the baseball game. I can`t wait for the Yankees season to start.

MATHISEN: And they`re hurt. They`ve got a lot guys on the DL going into the season.

I know that Cleveland Indians have cut the prices of beer and hotdogs and all kinds of things to fill some seats. They used to sell out all the time. But not I recent years.

GHARIB: You know, I`m from Cleveland.

MATHISEN: Oh, really? I didn`t know that.

GHARIB: So that`s another one of my -- I always have a hard time to choose.

MATHISEN: Go Indians.

GHARIB: Indians or Yankees.

Anyway, we`ve got to leave it there.

That`s NIGHTLY BUSINESS REPORT for tonight. And we want to remind you that this is the time of the year your public television station seeks your support -- support that makes programs, like NIGHTLY BUSINESS REPORT, possible.

MATHISEN: It`s been a wonderful week with you. Thank you for welcoming me to NIGHTLY BUSINESS REPORT --

GHARIB: Thank you for welcoming me to CNBC. It`s great to be here.

MATHISEN: And thank you all for watching. On behalf of your public television station, thank you for your support. Have a great weekend, everybody. We`ll see you next week.

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) 2013 CNBC, Inc.

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